How to Create A Housing Bubble

The following article first appeared in Reinventing the Rice Bowl

Why cooling measures and subsidies offer no solutions to rising prices and declining fertility

by Kenneth Jeyaretnam

The question I’m most asked by Journalists is, “What are the issues this coming election?” The answer I most often give is that they haven’t changed that much from the previous election. There is really only one key issue this coming election. It is housing, it is immigration, and it is the cost of living. They are one because they are all part of the same.

When you take a closer look at supply and demand as it relates to HDB housing it becomes clearer that the issues remain the same because the government is a behemoth incapable of reacting fast enough to changing circumstances that it is itself responsible for. An analogy might be a brontosaurus with several primitive brains in different parts of the body so that there is no central coordination. Immigration and housing are specifically two sides of the same coin. In its simplest form we have too many people and not enough housing.* According to Singapore in Figures 2010 ** the stock of HDB flats rose by only about 11,000 units between 2004 and 2009. At the same time the Singapore resident population rose by 461,000 between 2000 and 2009 and the total population rose by nearly a million.

Another journalist asked me for my opinion on the statistic, widely disseminated around the web, that 85% of Singaporeans own HDB housing. That figure originated with a senior civil servant responding to The Reform Party’s proposals for easing our HDB woes. Crucially it was that 85% live in HDB housing not own it. I re-educated that journalist who corrected the mistake but the wider public don’t make the distinction and a myth is peddled.

At this moment the resources are not available for me to calculate the exact statistic but the number of HDB managed units at end 2009 was 888,143. If we divide this by a resident population of 3.7 million this comes down to roughly 25% ownership. Then you need to factor in children and joint ownership and we don’t know what the actual percentage of that 888,000 is rental. The actual ownership percentage is probably below 50% of adults. So the majority of Singaporeans would benefit from lower prices as it would enable them to gain a foothold on the property market or move to a bigger property.

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