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The fallacies of PAP’s ‘asset enhancement’ policies

Posted by singaporege2011 on April 21, 2011

PAP Housing Minister Mah Bow Tan has been coming out in force in recent days, lampooning the Workers’ Party for its proposal to lower the prices of HDB flats by lowering land sales.

The original aim of HDB was to provide affordable housing for Singaporeans till the 1990s after Mr Mah took over the Ministry of Housing Development, ‘asset enhancement’ became a cornerstone of Singapore’s housing policies.

Instead of selling new flats at affordable prices to Singaporeans, they are pegged to that of the resale market and prices were allowed to appreciate.

As public housing is a necessity and HDB is the biggest housing developer in Singapore, the PAP government is able to inflate prices artificially via the following means:

1. Limit supply of land and new flats: Only some 3,100 flats were built between the years 2006 and 2008, during which the floodgates were opened to immigrants.

2. Increase demand: Demand for HDB flats is popped up by the relentless influx of foreigners and the ease of which they are given Singapore PRs thereby enabling them to purchase flats from the resale market.

Due to a combination of lack of supply and growing demand from population growth, the prices of HDB flats nearly doubled between the years 2006 and 2010 while the median income of the average Singapore worker remains stagnant.

It is fallacy that Singaporeans stand to benefit from the appreciation in value of their HDB flats for the following reasons:

1. Rising prices of HDB flats does not automatically translate into capital gains for home owners. If they sell their homes now, they will have to fork out more money to buy a more expensive property in today’s market thereby effectively wiping out their capital gains.

2. It is impossible that prices will continue to increase forever. At some point in time, prices will drop and even crash which will leave home owners in dire straits as the banks refinance their mortgage loans.

3. Singaporeans are depleting their CPF to pay for a roof over their heads. Most will have little savings left for retirement and to fall back on in the event of emergencies such as retrenchment or hospitalizations for serious illness.

The PAP’s ‘asset enhancement’ policies only benefit the following groups of people:

1. Rich Singaporeans and PRs who own more than one flat. Only they will be able to reap a hefty profit from the sale of their HDB flats.

2. PRs who sold off their resale flats and left Singapore for good. If they bought the flats in the 1990s and early 2000s and sell them now, they will be able to retire comfortably back in their homelands.

3. PAP government: As Mr Mah admitted himself, the proceeds from the land sales for building HDB flats go to the reserves which are then used for investment purposes by Temasek Holdings and GIC.

4. HDB: Higher prices of HDB flats translate into higher stamp duties which owners have to pay whether they purchase their flats from HDB itself or the open market.

5. Banks: Higher flat prices translate into higher bank loans and interest earn.

6. PAP ministers: One little known fact is that a buoyant property market generates positive GDP growth. As the multi-million dollar salaries of PAP ministers are pegged to GDP growth, the higher the growth rates, the more money they bring home.

The current growth in property prices is untenable in the long run and prices will drop, sooner rather than later. When the crash finally comes, it will be a painful landing for Singaporeans who bought the PAP’s pipe dream of ‘asset enhancement’.

4 Responses to “The fallacies of PAP’s ‘asset enhancement’ policies”

  1. michael lim said

    To add, an exorbitant public flat only makes me more worry about how my children will afford it when its their time to own one.They gonna work, work and work to be able to own one. I think ministers do not forsee this problem about their children as the family wealth is more than sufficient to take care of it.

  2. Anonymous said

    The next generation is unable to inherit the HDB at a valuable price because HDB is a 99 years leasehold. On a long-run, the price of a HDB must depreciate to zero when the leasehold expire. Our next generation has to take care of themselves by borrowing to buy their own flat. Parents cannot pass down to them since the leasehold of the flat would eventually expire.

  3. F De PAPies said

    THE key issue is, upon 99 year lease, the ‘asset’ is worth ZERO.
    Therefore ‘depreciation’ is the logical sense, whereas ‘appreciation’ that the PAP advocates is just rubbish, or just a big lie.

  4. Disappointed said

    This is really a sad situation which we have brought ourseleves into with our decision 5 year ago. I have been pro PAP all my 40 over years. Now have been awaken by all the happenings. My faith has now been shaken and wonder as a citizen what are my entitlement in view of basic necessity…. Now I fear for my future if I ever had a roof over my head when I reach my golden years 😦

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