HDB resale prices: Don’t just find a scapegoat

Dear Ms Chua,

I refer to your Straits Times article dated 11 Feb 2010.

You said that rising HDB resale prices is not an issue to the majority of 880,000 flat owners. However, there are perhaps 2 million or more children living in those 880,00 flats who would one day grow up and become buyers of flats themselves. Rising HDB prices will be an issue to them and by extension an issue to their parents who are the owners of the 880,00 flats today.

You provided figures to show that there are about 95,600 potential buyers in the resale market with only 37,205 actually making the purchase. Perhaps the remainder 58,395 were forced out of the market by high prices which means there could be a lot of unsatisfied demand.

You said that old citizens should cheer PRs for boosting demand. But when demand is boosted beyond what supply can meet, prices shoot up making life miserable for younger citizens. Old citizens have reason for concern because someday, their younger relatives will end up paying for this price increase.

You declared your hope of selling your HDB flat at a price higher than what you paid for. But have you spared a thought for your poor nephews and nieces who would one day end up paying a lot more for your gain?

You said that the HDB flat after five years is bought and sold like any commodity. But the flat is not just another commodity, it is also a necessity much like rice is. When the price of rice shot up by 30% in April 2008 due to the reduction in global supply, Singaporeans panicked. Likewise when HDB price shoots up, Singaporeans have reason to panick.

You said that good rental yields speak well of the health of the resale market. But it also reflects the imbalance between supply and demand for housing.

You said that rising prices is geniunely caused by high levels of immigration. Therefore, PRs are not scapegoats but are part of the high levels of immigration that is the reason behind price increases.

You said that the spike is short term since the flow of foreigners should slow. But the slowing of foreigner intake will be slow, as indicated by the authorities and the building of new flats to accomodate those already here does not seem too fast either. Hence, it remains to be seen whether the spike will be short term. Short or long term, how do we set right the damage caused by the gross and sudden increase over the last three years?

You said that spooking the HDB resale market will cause a fall in asset values that will affect the houshold’s sense of wealth and retirement security. First, we need to acknowledge the fact that HDB prices have shot up by 40% over three short years which can amount to a hefty price increase of a hundred to two hundred thousand dollars. That’s a hell lot more money to fork out that will wipe out years perhaps decades of savings. Not only is this grossly unfair to the buyer, we are simply robbing Peter to pay Paul which adds absolutely nothing to the nation as a whole. This runaway price situation is badly in need of a rein in and that hardly amounts to spooking. Secondly, we need to also recognise that this sense of wealth and retirement security is only felt by the heads of the households because each and every child in those households will feel neither wealth nor retirement security. Instead, they will feel impoverishment and a sense of hopelessness as prices climb ever so out of their reach, many years down the road.

We cannot think short term without looking at long term implications. We cannot just think about our own selfish gains without considering the burden this places on others. We should recognise that money doesn’t drop from the sky and that wealth due to rising flat prices is not real wealth being created but merely wealth taken from the poor buyer forced to pay higher prices. This is akin to gambling where money is merely transferred from one person to another, not created. But while we can choose not to gamble, we can’t chooose not to buy a flat when the time comes for us to set up a family. Let us not make losers out of buyers just as we do not wish to become losers ourselves when we sell our flats.