D Lim

I refer to Mr Mah Bow Tan’s rebuttal to WP’s proposal on pegging HDB prices to median salaries.

Let me preface my comment by saying that I have been an ardent supporter of PAP policies over the years, and I think they have done an exceptional job. However, for this particular issue, it appears that WP’s position is more intellectually pure than the PAP’s.

Indeed, Mr Mah’s response appears to be missing the woods for the trees.  At the end of the day, we need to go back to basics  –  to what the fundamental mission of HDB is, and it is to provide affordable housing for the masses.

To determine the affordability of a house, we need to look at price vs salary. From this measure, HDB prices have become a lot more expensive over the years. For instance, in 1986, the starting salary of a graduate was about $1,400 per month (approximately), and a 4-room HDB flat cost around $65,000, resulting in a price to monthly salary ratio of about 46 times. Today, the average starting salary of a graduate is about $3,000 (generous estimate), and a 4-room HDB flat costs anywhere from $240k to about $572k (for the Peak @ Toa Payoh). This translates to a ratio of between 80 times to 190 times.

Hence, from an affordability perspective, HDB flats today are about 1.7 to 4.1 times more expensive than in 1986.

This has resulted in many people having to stretch out their mortgage payments to 30 years (even in one of the lowest interest rate environments in history) in order to keep mortgage payments at an affordable level.  Prudent financial planning guidelines typically advise that if you have to stretch out mortgage payments to 30 years in order to afford the monthly payments, you are probably buying a house that you can ill-afford.

PAP’s primary argument is that the subsidy is in the discount to market pricing. Well, the problem with this is that market prices are not linked to salaries (as market prices are also heavily influenced by offshore liquidity and general investor sentiment).  Over the last 10 years, we have all seen the market go astray, in various asset classes and in various geographies.  Hence, without a fundamental link to salaries, it is difficult to ensure that HDB flats will remain affordable (in fact, given the above examples, it is arguable that they currently are).

In his rebuttal, Mr Mah’s principal point is that lowering the primary market prices would lower resale market prices. This response appears to be populist and scare-mongering in nature, and skirts around addressing the fundamental issue.  Is it important that resale prices are maintained? As a flat owner, I would say ‘Yes’. However, is it more central to the mission of HDB than providing affordable housing to the masses? Well, clearly no.

Beside, the link between primary property prices and resale market prices is a tenuous one, at best. The resale market is driven by supply and demand. If HDB is able to flood the market with cheap flats, then yes, resale market prices will collapse. But as long as the demand tension dynamics remain unchanged, the resale market prices should still hold, regardless of where the primary market flats are priced.

Mr Mah’s other point regarding home buyers switching to new homes instead of resale flats is again, a peripheral point that can easily be addressed via policy levers (first time owner priority etc).

Finally, his point on this being an illegal raid on the reserves is irrelevant and unnecessarily confuses the issue.  The government makes spending decisions every day on policies which are in line with its policy goals.  If affordable housing is a policy goal, then such subsidy is a necessary means to achieve the
goal.

In summary, as a long-time PAP supporter, it is somewhat disappointing that Mr Mah has chosen to skirt the issue and serve up populist appeals with scare-mongering tactics, rather than to seriously address a serious issue for thinking voters.

 

Subscribe
Notify of
7 Comments
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
You May Also Like

A Foreign Domestic Worker’s Open Letter to Her Employer: What Your Helper Wants you to Know

Bhing has been a domestic worker in Singapore for 22 years. On her…

议员们分两地宣誓 今晚国会开幕

今天晚上召开第十四届国会的首次会议,李显龙总理表示,他期待所有有经验和新议员的表现。 李显龙昨日(8月23日)傍晚6时在脸书帖文,今晚(24日)国会开幕,受到疫情影响,开幕仪式也首次在多个地方举行。议员们将会在国会大厦和旧国会大厦艺术之家宣誓就职。 “哈莉玛总统将致开幕词,将阐明政府的优先任务和计划,重点在于如何应付冠状病毒19对我国医疗保健和经济所带来的打击。” “国会将在电视上直播。” 他指出,各部门将在接下来的数天,发表并解说政府施政的方针附录,之后将展开辩论环节。他期待各议员能够踊跃发表观点,“无论是有经验者或新加入者”。

确诊病例持续增加 当局展延夜总会和卡拉OK重启营业计划

本地疫情似乎有卷土重来迹象,近几日来社区感染病例持续增加,也让政府决定展延夜生活计划。 据贸工部和内政部的联合文告表示,当局原本已批准两家夜总会和十家卡拉OK参加重启营业的试验计划,预计本月恢复营业。 然而,随着本地冠病确诊数持续增加,新增新的感染群,当局决定展延试验计划,直至另行通知。 当局会同受影响的业者合作,为他们提供援助。 至于在上个月获准重开的三家酒吧则不受影响,可以继续营业。

Christians to wear white for Pink Dot again

LoveSingapore, a network of about 100 churches, has called on members to…