Archive for January, 2010

Resale flat prices – let market forces decide

January 29, 2010

Dear editor,

I refer to the letter by Irwan Jamil dated 29 Jan 2010.

Mr Irwan claims that his grandparents paid full in cash, the sum of $7,000 for their first HDB flat in the 1970s which can be sold for $200,000 today. That appears to be a handsome $193,000 windfall for Mr Irwan’s grandparents, not withstanding inflation.

But suppose Mr Irwan’s grandparents have a total of 20 grandchildren including Mr Irwan himself. Had there been no price appreciation, each grandchild would only have to pay $7,000 each for their flats. But because $7,000 has ballooned to $200,000, each grandchild must now fork out an extra $193,000 each. So the $193,000 windfall for Mr Irwan’s grandparents becomes a $3,860,000 debt burden for all the grandchildren. The extended family as a whole is now worse off than before.

While Mr Irwan’s grandparents can pay the full sum of $7,000 in cash, it would be difficult for any of Mr Irwan’s generation to pay the full sum of $200,000 in cash today. Compared to two generations ago, life has become tougher now. While price appreciation appears to be a bonus for one generation, it is actually a debt that has to be paid for manifold by future generations.

The Lease Buyback scheme merely shows that the high cost of flats have left Singaporeans with absolutely no money for retirement. If we have to sell our flats for retirement funds, it simply means we never made enough to truly own our flats in the first place.

The fact that those who bought at the peak of 1996-1997 are now back in positive territory doesn’t change the fact that they lost out compared to those who bought before or after the peak. It is no longer enough for us to focus on our jobs and our lives. We must also monitor the property market vigilantly to make sure that we buy at the right time. One bad timing can mean the wiping out of years of savings. Like it or not, we will become a nation of property speculators more focused on timing the market than making the next breakthrough in our respective fields of work.

The excess cash in an HDB resale transaction does not contribute to the GDP because it does not result in the production of a good or service. It is merely money changing hands much like that which happens at a gambling table in a casino.

So it is indeed unfortunate that many people like Mr Irwan fail to understand what is really happening in our system. It is a system that squeezes the people and yet the people doesn’t even know it.

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Don’t cast protest vote over rising flat prices: MM

January 29, 2010

Dear Mr Lee,

I refer to your comments as reported by Straits Times on 28th Jan 2010.

You said that our flats are subsidised. But what is $40,000 compared to $100,000 to $200,000 increase in flat prices over the last three years? Even with the subsidies, Singaporeans end up paying a lot more.

You said that our flats will appreciate in value and that will add to our wealth. But for every $100,000 addition to the wealth of my estate, each of my children must fork out an extra $100,000 for his or her future housing needs. As long as there is more than one child, the family as a whole loses, not gains. The only entity that truly gains is the HDB and the government. It would really be ‘daft’ of you if you cannot see the silliness of your own reasoning.

You warned Singaporeans that our flats will not longer be of value if Mah Bow Tan loses. Are you threatening Singaporeans? Mah Bow Tan has already lost many years ago to Chiam See Tong and yet Potong Pasir flats are as pricey as any flat would be.

You seemed to chide Singaporeans for always wanting it cheaper and better. But flat prices have gone up by 30% in the short span of three years. We are not asking for cheaper, we are asking for price stability. Are you sure you’re getting your facts right? Are you sure you’re not being ‘daft’ instead?

You said the government has to price flats fairly. Compared to three years ago, new buyers have to pay 30% more now. You call that fair? Did our salaries increase by 30% over this period?

You said that the government is giving us something more valuable than what we paid for. If the price of flats increased by $100,000 over the last three years and the government gives a $40,000 subsidy, aren’t we paying more still? Isn’t it ‘daft’ to insist that we are paying less when we are actually paying more?

You said that the government gives us an asset that is below market price the moment we buy it. But by the time we buy the asset, the market price of that asset has already gone up by $100,000. So even with a subsidy of $40,000, we are still paying $60,000 more for nothing the moment we buy it.

So if there is a ‘loss’, it’s a fictitious one that confounds the electorate.

New flats will stay affordable: PM Lee

January 29, 2010

Dear Mr Lee,

I refer to your comments as reported by Straits Times on 27 Jan 2010.

You said that the government has less control over prices in the resale market. You under state the power of your own government. Imagine if the government were to suddenly build 500,000 new flats all over Singapore. What would happen to resale flat prices? They will simply plummet. So by controlling the number of new flats being built, the government indirectly controls the price of resale flats. While the control is not direct, it is no less potent.

Even though resale prices are set by individuals on a willing buyer, willing seller basis, the willingness of a buyer to pay top dollar for a resale flat also depends on the availability or lack thereof of alternatives. It is because there are no viable alternatives, not enough new flats, that buyers are compelled to buy from the resale market.

You said that flats prices fluctuate from year to year. But that’s not the case over the last three years where prices have been shooting up higher and higher and does not seem to be abating at all.

You said that the value of our flats depends on the strength of our economy. But how come flat prices continue to go up even during a recession when the strength of the economy is at its weakest? Isn’t that a ‘daft’ argument?

You said that Singaporeans can enjoy an appreciating asset. But how real is that enjoyment? If I sell my flat at $100,000 profit, some poor buyer will end up making a loss of $100,000. So one man’s enjoyment will be another man’s suffering. Seen as a whole, Singaporeans do not enjoy more than they suffer. This is a zero sum game that contributes absolutely nothing to the productivity of our nation. Instead, it is like the transfer of money over a gambling table in a casino.

You said that the expectations and aspirations of the people have risen sharply. That is not the case. It is the price of flats that have risen sharply. It is not the case of us demanding more now. It is the case of us demanding that things don’t go out of hand.

Wrong to accuse them of driving up costs: Shanmugam

January 29, 2010

Dear Mr Shanmugam,

I refer to your comments as reported by Straits Times on 18 Jan 2010.

You said that it is a misconception that there are five million people putting pressure on all of us because the 1.3 million here on temporary work permits impose no burden on the public housing system. That unfortunately, is the real misconception.

Even as workers on temporary permits aren’t allowed to buy flats, they are allowed to rent flats or rooms. The flats that they rent becomes unavailable for sale to the people and thus puts presure on the availability of units. Also, land that could otherwise have housed Singaporeans are being used to house workers like those in Serangoon Gardens.

On what basis do you brush aside the 500,000 PRs as being too small a number to impact prices? You said the number of BTO flats to be launched this year is 12,000. If every one of these 500,000 PRs were to buy a flat each, it would take 40 years to build all the flats to accomodate these PRs.

While Singaporeans may be the ones who are forking out top dollar for certain flats, are there cheaper alternatives for the same locations? And for flats that are much more far flung, are they really that much cheaper?

Instead of imposing limits on resale flat prices, the Government can impose limits on the price of new flats sold by the HDB. In a climate of spiralling prices, the Government should not join in the fray but should hold flat prices steady instead. That way, the government does not end up making one person happy at the expense of another. It only makes itself less happy. Is the government willing to do that?

The concessionary loans and grants of $40,000 pale in comparison to the $100,000 to $200,000 increase in flat prices over the last three years.

While 8 in 10 Singaporeans pay for their flats entirely through their CPFs, they will have to keep paying for the next 30 years and would have nothing left in their CPF for retirement. You call that affordable?

Politics is, first and foremost, about satisfying the needs of the people. All popular revolutions and uprisings stem from inadequate provisions from the government. The art of communication cannot change the feelings of hardship that the people has to endure.