by Foong Swee Fong
It is now a known fact that the government makes folks who buy HDB flats, pay for land at market price, albeit at a small discount, with the proceeds going into the Past Reserves.
Mind you, the market price has been shooting through the roof as Singapore is a magnet for investors given our strategic location, stability and pro-capitalist policies.
But this is a two-edged sword, given our adherence to a very open economy.
The minority of Singaporeans who own land, property and have tons of money to invest, will see their riches multiplying, whereas the majority of Singaporeans who are working-class folks will see their cost-of-living climbing higher and higher.
Indeed the cost of a BTO, costing about two years of household income back in the ’70s, has now ballooned to 4 to 7 times of household income, causing affordability to spiral from “Affordable” to “Seriously Unaffordable” and “Severely Unaffordable”, according to Demographia International Housing Survey 2022.
The “4 to 7 times” above, is actually understating the escalation because, in the ’70s, household income generally consisted of one income, while today, it is at least two.
What’s more, houses were bigger then. A 4-room flat in the 70s is almost as big as a 5-room flat now.
A major reason for the escalation of HDB flat prices is the inclusion of the market price of land into the selling price of the flats, unlike when HDB flats were first launched.
The proportion of the cost of land in the total selling price of a Build-To-Order (BTO) HDB flat has increased in tandem with the increase in the cost of land, which in turn, is affected by the size of the population and growth in Gross Domestic Product in Singapore.
When HDB flats were first sold, the land cost was negligible as a proportion of the total selling price. In the mid to late ’80s, it was about a third. Today, it accounts for almost 60%, according to data recently released by the government.
Thus, a young couple buying a S$600,000 BTO today will be contributing S$360,000 to our Past Reserves, before interest, supposedly to ensure the future of Singaporeans.
The government claims that the stream of earnings from the investment of the Past Reserve contributes towards the national budget, thus lightening the tax burden of Singaporeans.
But we should judge a government by their deeds, not their words.
Given that BTO flats are still selling like hotcakes and HDB is like an open tap gushing out reserves, why is the government increasing the Goods & Services Tax (GST)?
This is despite the Past Reserves still being higher than it was five years ago after the government dipped big time into our Reserves.
And also, did most of the money from the Covid handouts go towards helping Singaporeans or big businesses?
Without the government dipping into the Reserves, would Singapore Airlines, some other Government Linked Companies (GLC), and Multinational Companies be roaring today?
Our Reserve is to safeguard our capitalist ecosystem, first and foremost, but Singaporeans will have to pay for it, including through their HDB flats.
This piece was first published on Mr Foong’s Facebook page and reproduced with permission.
