As most Singaporeans have been told since ages ago, HDB's mission is to provide affordable housing to the public. Of course the issue of what is affordable is debatable but we all know that HDB provides a market subsidy for the flats.
The truth is that it is not even a so called market subsidy but HDB is simply providing low class private housing. That is, HDB operates just like a private developer that is given an unfair advantage to provide housing of the minimum standard. It returns the favour to the government by propping up property prices.
Why is this so? HDB buys land from the government at market prices. These prices are supposedly what a private developer would have to pay in order to purchase the land. Subsequently, they add in the costs of building the flats, carparks, surrounding landscaping, etc, to arrive at a final cost. Then the subsidy amount is deducted to produce the final price. Allegedly, this price is subsidised as a private developer would not have given the subsidy if it was asked to build the flats.
The problem now is that HDB is not a real private developer. In bad times, a private developer has the option of not bidding for the land if it deems the price is too high and you will start seeing a contraction in new private apartments. For the HDB, this is not really an option as it needs to provide housing for the masses however the economy is doing. So, the SLA is able to maintain the high prices on the land since there is always a ready buyer. They just need to sit tight and wait for the good times to come around before selling to the private developers.
Thus, the fact is that HDB is there to prop up the land prices and act as a private developer during the bad times. This is why prices of new HDB flats will never fall. When the good times come around, SLA will sell the land to private developers at inflated prices and thus ensuring that private property will always be more expensive than HDB flats even if they were to be built to the same standards. SLA will then raise the price at which it sells land to HDB to reflect true market value.
Effectively, this scheme ensures that HDB will be around to provide a support for prices. This price control mechanism implies that HDB flat buyers are indirectly subsidising the government rather than being subsidised as it is basic economics that any price floor only serves to provide a subsidy to the sole seller, SLA, in this case. Somewhere along the way, HDB has deviated from the noble aim of providing affordable housing to providing a price support.
In good times, this effect will not be evident as demand pushes the price above the support. However, in bad times, this downward pressure must be repulsed by whatever means necessary. You will then understand why Singapore needs the foreign talents so much. Crappily-implemented policies like Sers and upgrading projects start to creep in to maintain the facade of value retention. Not forgetting also the various policies that restrict the unfettered buying and selling of HDB flats.
At different stages of your life, you have varying needs of property. For a senior citizen, there is no point spending a vast sum of money on a swanky condominium when companionship is more important. That is another problem posed by a greying population. That is, it generates another downward pressure force. Unfortunately, the government operates a monopoly on land in this country.
Singaporeans are not totally blameless as they have believed that their flats are an asset and they were apprehensive about their values falling. They have believed this fallacy and converted all their cash/CPF into HDB flats. They have been riding a tiger (voting for PAP) and they do not know when/how to get off.
The painful irony is that we are paying our leaders big bucks to continue this con job. We are buying shoddily built housing that don't belong to us and to top it off, we are subsidising the sellers for it during bad times.
The truth is that it is not even a so called market subsidy but HDB is simply providing low class private housing. That is, HDB operates just like a private developer that is given an unfair advantage to provide housing of the minimum standard. It returns the favour to the government by propping up property prices.
Why is this so? HDB buys land from the government at market prices. These prices are supposedly what a private developer would have to pay in order to purchase the land. Subsequently, they add in the costs of building the flats, carparks, surrounding landscaping, etc, to arrive at a final cost. Then the subsidy amount is deducted to produce the final price. Allegedly, this price is subsidised as a private developer would not have given the subsidy if it was asked to build the flats.
The problem now is that HDB is not a real private developer. In bad times, a private developer has the option of not bidding for the land if it deems the price is too high and you will start seeing a contraction in new private apartments. For the HDB, this is not really an option as it needs to provide housing for the masses however the economy is doing. So, the SLA is able to maintain the high prices on the land since there is always a ready buyer. They just need to sit tight and wait for the good times to come around before selling to the private developers.
Thus, the fact is that HDB is there to prop up the land prices and act as a private developer during the bad times. This is why prices of new HDB flats will never fall. When the good times come around, SLA will sell the land to private developers at inflated prices and thus ensuring that private property will always be more expensive than HDB flats even if they were to be built to the same standards. SLA will then raise the price at which it sells land to HDB to reflect true market value.
Effectively, this scheme ensures that HDB will be around to provide a support for prices. This price control mechanism implies that HDB flat buyers are indirectly subsidising the government rather than being subsidised as it is basic economics that any price floor only serves to provide a subsidy to the sole seller, SLA, in this case. Somewhere along the way, HDB has deviated from the noble aim of providing affordable housing to providing a price support.
In good times, this effect will not be evident as demand pushes the price above the support. However, in bad times, this downward pressure must be repulsed by whatever means necessary. You will then understand why Singapore needs the foreign talents so much. Crappily-implemented policies like Sers and upgrading projects start to creep in to maintain the facade of value retention. Not forgetting also the various policies that restrict the unfettered buying and selling of HDB flats.
At different stages of your life, you have varying needs of property. For a senior citizen, there is no point spending a vast sum of money on a swanky condominium when companionship is more important. That is another problem posed by a greying population. That is, it generates another downward pressure force. Unfortunately, the government operates a monopoly on land in this country.
Singaporeans are not totally blameless as they have believed that their flats are an asset and they were apprehensive about their values falling. They have believed this fallacy and converted all their cash/CPF into HDB flats. They have been riding a tiger (voting for PAP) and they do not know when/how to get off.
The painful irony is that we are paying our leaders big bucks to continue this con job. We are buying shoddily built housing that don't belong to us and to top it off, we are subsidising the sellers for it during bad times.
