FAPee: Low-value property will sustain poverty. Logical?

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Apr 18, 2011

Low-value property will sustain poverty

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MORE than 80 per cent of Singaporeans live in public housing and nearly all families own the flats they live in. How would that be possible if the median income is the single factor determining the affordability of HDB flats? ('WP's policy proposals'; April 10)
It is a known fact that in any market economy, the disparity of income distribution is such that the median income is at best a middle line to divide the 'haves' and the 'have nots', and the lower half of the 'have nots' would barely keep up with consumption much less save for any asset accumulation. Any pricing of HDB flats on median incomes, to encourage the 'have nots' to own a home property, is a mirage.
The fact that Singapore's public housing is based on market pricing, with state land costs factored in, allows HDB resale flats to obtain a free ride to rise on the trend of private housing prices. The Government by fiat has chosen to subsidise first-time HDB flat buyers with varying amounts of discounts for different groups to start them off on home ownership. Unless the Workers' Party has a ready solution to raise the incomes of the lower half of the 50 per cent of working Singaporeans, giving them the ownership of a low-value property will only perpetuate poverty.
The value of HDB flats over the long term will depend on the performance of the economy. Until there is a better alternative to a market economy that lifts all boats when it works, it is prudent not to poison the water that one depends on to live.
A contribution that all opposition parties can make to this end is not to destabilise this fundamental but to help find ways to make it work fairer and better.
Wong Hin Wai

 

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___________While wages are depressed by relentless FTrashisation???[/SIZE]
Apr 18, 2011

Perils of asset enhancement for younger Singaporeans

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NATIONAL Development Minister Mah Bow Tan stressed the policy of keeping prices of new HDB flats pegged to resale market prices, and said there was nothing wrong in giving Singaporeans an asset that grew in value over time ('WP's housing proposal irresponsible, says Mah'; last Friday).
Such an 'asset enhancement' policy sharpens the divide between the rich and the poor. Households and families that have already bought an HDB flat would be able to enjoy the benefits of having the values of their homes rise, whereas young people who are yet to purchase a home, whether single or married, would be left sitting on the outside looking in.
In effect, the real value of the savings of persons who have not purchased a home, or who do not own property, are continually depressed by the rising values of residential assets caused by the asset enhancement policy.
The asset enhancement policy has worked in the past because real incomes grew faster than the rate at which property values grew, so the depreciating effect on the value of savings was not felt because savings grew faster than property values.
However, in recent times, two effects have set in. First, the maturing of our economy has led to slower growth in productivity, real incomes and real savings. Second, the large influx of foreign workers has driven up the demand for rental property, which has in turn made property attractive for the high rental returns they give to investors.
The young today must work harder, possess more qualifications, and earn higher real incomes to be able to afford housing of the same size and standard that their parents' generation were able to afford as they started out. This raises the danger that late bloomers today will be mired in a poverty trap, unable to afford to own their own homes, or start their own families.
Tan Jiaqi
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