Housing Board does have buffer stock of flats

Dear Straits Times,

I refer to the 24 Mar 2011 letter by HDB’s Mr Ignatius Lourdesamy.

Mr Lourdesamy said there is a 10% to 20% buffer from unsold BTO flats and from balance en bloc redevelopment flats. However, according to a 4 Mar 2011 Straits Times report, Mr Mah said there have always been unsold flats over the past decade. Is the 10% to 20% buffer referring to these unsold flats that nobody wants? What good is a buffer of flats that nobody wants?

He also said that the surge in housing demand is due to strong economic recovery, low interest rates and bullish market sentiments. However, during the global financial crisis years of 2008 and 2009, HDB resale prices continued to climb by 14.5% and 8.2% respectively. Since housing demand continued to surge during the economic crisis, economic recovery or bullish market sentiments cannot be the main reasons for the explosion of housing prices this time.

He also said that HDB flats cannot be compared to a staple like rice because it is an investment and its purchase can be advanced or deferred. But rice can also be a form of investment just like any commodity. If you foresee an imminent crop failure, you may profit from shoring up rice at cheap prices and selling it later at higher prices. Similarly, the purchase of staples or necessities can also be advanced or deferred. Some Singaporeans were reported to have stocked up on rice during the global rice shortage in 2008. A few days ago, Hong Kongers were shown on TV queuing up to buy Japanese milk powder in advance. Japanese restaurants here were also shown to be buying up essential raw materials in advance too. For many years now, the deflation climate in Japan also meant that many consumers chose to defer their purchases of just about anything including rice. Therefore, HDB flats can be compared to a staple like rice.

He disagreed that oversupply is a local problem because depressed flat prices due to oversupply affects all home owners. The word ‘depressed’ comes from an investment perspective. But the HDB flat is first and foremost a basic essential, not an investment. For a basic essential item, the correct word to use is ‘stable’, not ‘depressed’. Also, stable prices cannot be due to oversupply which will only cause prices to plummet instead. So when prices hold steady, it is not an oversupply situation but a situation where supply meets demand. A situation where prices are stable is fair to everybody. Buyers don’t pay more, sellers don’t earn less. After all, we are just Singaporeans selling to fellow Singaporeans.

The situation where people are in debt even after selling their flats is precisely due to the property market rising sharply and then falling sharply. So if we can prevent prices from climbing sharply to begin with, we can avoid this situation. It is therefore all the more important to keep HDB prices stable.

The interests of flat owners are no less important than flat buyers. But is it the HDB’s prerogative to make sure that flat owners profit at the expense of flat buyers? By letting HDB prices climb up, up and away, is the HDB telling Singaporeans that flat owner interests are more important than flat buyer interests?

For the HDB resale market, increasing prices means a transfer of wealth from Singapore buyer to Singapore seller. That is like robbing Peter to pay Paul. The country gains nothing. But for new HDB flats, increasing prices means that Singaporeans pay more to the government. So the ultimate winners in a property boom are the land owners. Since the government owns most of the land in Singapore, it therefore becomes the biggest winner of all.

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