WP’s housing proposal irresponsi​ble, says Mah

Dear Minister Mah,

I refer to the 15 Apr 2011 Straits Times report of your comments on the Workers’ Party’s housing proposals.

You said government subsidies on new HDB flats add up to $1 billion each year. What government subsidy are you referring to? If you are referring to the $40,000 HDB grant, HDB resale prices have gone up by more than $150,000 over the last four years. Since new flats are pegged to resale flats, new flats must be fetching an additional $100,000 each at least. Therefore, new flats should fetch more billions for the government than the $1 billion ‘subsidy’ each year.

If you’re referring instead to land cost subsidies, then whatever that the HDB pays for land equates to earnings by the Singapore Land authority (SLA). This is merely an internal transfer and not real subsidy. Given that land was already bought for as cheap as $1 over the past decades, land costs are hardly a cost to the government.

Pegging housing prices to salaries does not necessarily mean asset devaluation. Isn’t your insistence on 30% income limit for housing purchase a form of pegging housing price to salaries, albeit too high a peg?

The PAP’s asset enhancement policy is also a liability enhancement policy. As housing prices soar, so do Singaporeans’ housing mortgages, albeit those of the later generations.

If you disagree with Ms Sylvia Lim’s statement that resale prices take some time to filter to new flats, why didn’t you show more concern when resale prices started to shoot up four years ago? If you believe resale flats and new flats are interlinked and rising resale flat price will lead to rising new flat price, why didn’t you do more to curb rising prices then?

You said the cost of a new flat is $300,000. But a huge chunk of the $300,000 bill is land cost which gets reflected as profit for the SLA instead. So take that out and show us the real cost instead.

There is nothing wrong in making assets grow except that it also makes future liabities grow as well. Of course you are proud of the asset enhancement policy because it means every new flat the government sells fetches more money for the government.

You said you are proud to have given almost all Singaporeans a home. If you didn’t take away almost all our land on the cheap in the first place, why would we have needed you to give us a home?

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3 Responses to “WP’s housing proposal irresponsi​ble, says Mah”

  1. patriot Says:

    “If you didn’t take away almost all our land on the cheap in the first place, why would we have needed you to give us a home?”, unquote.

    If the people are not resettled, what to do with the surplus HDB Units some years back? And how to make the New HDB Flats cost more(enhanced value?)?

    patriot

  2. Naz Says:

    Its not HDB that gives the 40k grant, its CPF.

    In which case, it should not be reflected in the HDB balance sheet. Marlboro Tan trying to smoke us again!

  3. Correction Says:

    “You said the cost of a new flat is $300,000. But a huge chunk of the $300,000 bill is land cost which gets reflected as profit for the SLA instead.”

    Actually, the land cost should NOT be reflected in the HDB price at all, because HDB doesn’t sell the land to us i.e. we don’t have any real property rights when we buy HDB. HDB is simply selling us the 99-yr lease on the flat itself (HDB Agreement For Lease).

    Contrast this with a 99-yr condo. In this case, the condo buyer actually purchases 2 things: the 99-yr lease on the condo unit + 99-yr lease of his share of the land (strata-title deed).

    Compare the wording between the HDB Lease Agreement with any Condo Title Deed document, and you will realise that HDB buyer has no land rights and no real property rights. Any lawyer can also tell you this.

    The so-called land “purchase” by HDB from SLA is indeed just an internal transfer of assets — there is no loss or expenditure at all. HDB keeps the land — it is NOT sold to you. It’s just like transferring $100K from your DBS account to your UOB account. At the end of the day, you still have the $100K.

    In the accounting books, it is like the below:-
    Before HDB “buys” land from SLA:
    MND SLA HDB
    ————— ——- ——–
    Land (SLA) Land $100M
    $100M (HDB)

    After HDB “buys” land from SLA:
    MND SLA HDB
    ————— ——– ——-
    Land (HDB) $100M Land
    $100M (SLA)

    So the land and the land cost is separate issue from HDB flat cost. If you check the latest GeBiz tender awards for HDB flat construction in 1st Quarter 2011, you will find out that the average cost to build each flat unit is about $130K. This price includes the cost-sharing for common areas such as multi-storey carpark, electrical substation, playground, landscaping, multi-function halls, BBQ pits, covered walkways, parks etc.

    So for construction cost of $130K per flat, HDB will sell you a new 5-rm flat for $380K. It’s a good business that 90% of Sinkies don’t know and cannot figure out.

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