Whose fault is it?
One of the socio-political issues which irk me the most is the fact that the HDB (resale) prices has almost doubled over the past 6 years. Let’s recall that the simple reason behind this is that the PAP let in too many foreigners to push up demand which led to housing-bubble levels of prices. In 2008, they let in 145,000 foreigners and new citizens while only building 3000 or so of HDB units which let the resale index to climb by 12 points that year.
To make matters much worse, the incumbent PAP has shown that they were grossly stubborn to the calls of the masses: Mr. Chiam brought the matter up in Parliament only to be rebutted that new flats cannot be built that rapidly as there was still some excess stock from the pre-BTO method by some dis-grace-ful minster of state, while giving some lame interview that we cannot speed up the building otherwise flats vacated by the elderly (who passed away) would drive down property prices.
What are the current sentiments?
Of course, all of these are but mere nonsense which has affected our sustainability of living and that we have become increasingly angry. Two by-elections lost for the PAP, thousands of people protesting against the population white paper, and the lack of national day flags do speak volumes about how we as common people feel. One thing which seems to at least pacify the people is the new measures of housing that would apparently help houses become more affordable. I have my doubts towards this approach.
Why are the measures ineffective?
The highlight of this national day speech is that middle-income households will get up to $20,000 more in special housing grants to purchase a 4-room BTO. Assuming a new flat price of $300,000 and an AHG of $10,000, a young couple in their late 20s will only have to fork out $15,000 via 2 CPF accounts and $15,000 in cash – something which is within reach of most dual-income, diploma-holding couples.
That is where the government is obviously missing the point; what we want when we speak about “affordable costs of living” is not for the government to give with grants funded from the coffers so that we could buy something out of reach. What we truly want is that housing prices to go back to a realistic level so that we can afford them without artificial intervention; with the same outlay described earlier on, a young couple would rather but a resale flat (at 2004 prices) at 10% down-payment rule without help from the goverment.
Regardless of grants, the spillover effect of high housing prices means that inflation as well as the costs of living remains high. This is especially since not all the people are able to get the subsidies, and have to pay the bubble-level prices out of their own pockets. They in turn will lead them to negotiate for higher wages and wage stickiness in modern economics will simply mean that business have to pass on their costs to other consumers. Other aspects of our expenses will be aversely affected as well if the roots of the problem is not tackled: a more practical solution is to drive down the costs of housing by increasing supply and putting outright restrictions on new citizens as well.
Who is going to pay for all these?
The PM has candidly hinted that taxes may increase in the future since the government cannot create money from a magic wand and that taxes may have to be increased. Taxes may have the positive effect of redistributing wealth, but this method employed is clearly not the way to go given that it again will lead to increased costs to us consumers elsewhere, be it through consumption or business taxes leading to inflation. Again, lowering the prices through increased supply would be a better option.
Have we got too much bullshit?
One measure that appeals to many Singaporeans is that PRs will now have to wait for 3 years after attaining their PR status before they are eligible to purchase a flat. Perhaps what we want to know is how many people actually bypass this by becoming “new citizens” who are not faced with this restriction. Additionally, since we cannot legally discriminate between new citizens and local-born citizens, I reiterate what has been said during the NS focus group that those who have served NS be given additional priority.
Also, I propose that we to impose hefty capital gains tax from PRs who have sold their HDB flats at a gain.
The “3-generation flats” also might seem like a good initiative on part of the PAP government but we need to remind ourselves that this masks a bigger problem of high property prices; the current trend and sentiments from the younger generation is for independent living, yet such flats encourage families to live together. To me, what the PAP is saying is that instead of having a 3-room flat for the parents at $250,000 and a 4-room flat for the family at $320,000, they now can live together at $450,000 for the new flat. Is this what we want? I cannot reiterate that we need low prices and not some uncertain measure.
While they have promoted the need for financial prudence, they have also given nonsense about a $15,000 grant for 2-room flat owners to upgrade themselves. This is clearly ironic and may in fact encourage the lower-income family to overstretch themselves to a level beyond what they can afford because they lack financial literacy and this seems to encourage overspenging. Such living will contribute greatly to increased stress from job security as well as to work beyond retirement age.
Conclusion
The PAP has tried to calm us down by giving some measures which seem to help us purchase HDB flats, but in my view this is otherwise ineffective and masks a larger problem. Furthermore, there are high costs incurred and this would lead to inflation in other areas of our lives. What we truly need is for prices to go down, a policy that is being rejected by MND at the moment. They have faltered before, and my prediction for the future is that such as stubbornness is likely to cause additional problems in the future. Until then, we may want to look at an alternative political party as government.
Joseph Tan
*Article first appeared on https://www.facebook.com/notes/joseph-kheng-liang-tan/pap-half-heartedly-cleaning-up-the-mess-they-started/159312834262109