Trapper's Swamp

Mr Mah Bow Tan, Minister for National Development, has again rubbished talk of HDB flat prices being unaffordable, dismissing the concerns of Singaporeans with dodgy numbers and empty words.

“We’ll keep the prices such that they are pegged to the income, so this is how we manage affordability. We make sure that the prices do not exceed the 30 per cent benchmark.”

As for comparing prices with those of 20 years ago, ‘those are not meaningful comparisons’.

“If we did that, we’d be comparing many things that we did 20 years ago, do we want to go back 20 years?” he added.

Mr Mah also reminded Singaporeans that the system had enabled them to own an “asset”:

“If you want to argue it’s too high, you can use all sorts of arguments,’ he said. The main point is this is part and parcel of a financial system that will allow people to own an asset.

This asset, the home, enables owners to monetise it for income later in life, he said. This may involve selling the property or applying for the HDB’s lease buyback scheme, which gives homeowners a source of retirement income.”

There were no answers to be found for the important questions that this "debate" has raised:

• How was the 30% of household income benchmark arrived at?
• Why is 30% of household income the "magic number"?
• What are the measures taken to peg flat prices to household income?
• Why have flat prices continued to rise despite widespread stagnation of income?
• Where are flat-owners supposed to live after they sell their flat as a "source for retirement income"?
• How does contunally inflating flat prices benefit the next generation?

Mr Mah has provided no answers, choosing instead to seek refuge behind the arbitrary 30% benchmark and disdainfully talking down to legitimate concerns from citizens, calling the comparisons "meaningless". I would like to see him take up Temasek Review's challenge:

Perhaps Mr Mah should provide us with the figures of the number of Singaporeans who are able to complete paying their housing loans twenty years ago compared to now for a more “meaningful comparison” instead of blindly quoting the thirty per cent benchmark.

Sadly, the probability of Mr Mah, and this government, answering that question is so low as to be negligible. And even if they do, we must remember we are getting figures from a minister who does not seem to understand what cash-over-valuation means or where it applies.

There is an argument that the increase in flat prices mean more wealth for Singaporeans; this study proves this "wealth effect is very much absent":

A natural question to ask then would be, with a more than 90% home ownership [rate] (both public and private), why should there be any concern about property price escalations if higher prices mean higher wealth for Singaporeans? Although there is no question that a higher price means a higher value of the housing stock, how this translates into a "wealth effect" is what matters for the aggregate economy. Abeysinghe and Choy (2007) have examined in detail the wealth effect of property prices on consumption in Singapore and found that the wealth effect is very much absent. In the absence of cheaper suburbs which offer quality living, the only way for Singapore residents to unlock property values is, apart from emigrating, to downgrade to smaller units.

[...]What is disturbing to note is that higher property prices, instead of creating a wealth effect, exert a negative and significant "price effect" on consumption expenditures leading to a fall in the average propensity to consume.

In other words, the rising flat prices don't add to our wealth, but instead drive down our disposable income. The government's argument that rising flat prices is beneficial to us is just flat out wrong. Using excuses to lead the people on a merry dance is yet another sign of the PAP losing touch with the electorate, and it is beginning to be obvious that they are too blind to even see that.