Housing queries WP should have asked

Dear Straits Times,

I refer to the 23 Apr 2011 letter by Mr Ang Kok Thiam.

Mr Ang accuses the Workers’ Party of asking the wrong questions and of proposing simplistic and ill-considered solutions because he feels that the solutions are detrimental to existing home owners.

Average HDB resale prices have shot up by more than $150,000 over the last four years. So compared to four years ago, flat owners have seen a boost of $150,000 on average to the value of their flats. It is this $150,000 increase in flat value that Mr Ang is trying so hard to protect. Any reduction to this $150,000 increase in flat value is, in Mr Ang’s opinion, detrimental.

Mr Ang should realise that he cannot realise the $150,000 increase in flat value unless he sells his flat. Having sold his flat, he cannot buy another flat because that will wipe out his $150,000 gain. So in order for the 85% Singaporeans owning HDB flats to realise the $150,000 increase in flat value, they must all sell their flats. Yet, these 85% Singaporeans must not buy back those same flats because that would wipe out their $150,000 gain. Where are they going to find another 85% of Singaporeans to buy those flats?

This is where the mirage of the supposed $150,000 increase in flat value lies in. If all Singaporeans decide to sell their flats, that $150,000 evaporates straight away. If having too many sellers lowers the price of flats, then having too many buyers will raise the price of flats. That’s how the $150,000 came about in the first place. There were too many buyers compared to sellers. In other words, Mr Ang is trying to defend the perpetual under supply and over demand of flats. That is irresponsible, that is not right.

However, Mr Ang can say that the flats need not be sold now but can be sold to future generations over many decades. If we think along that line, we must inevitably come to the conclusion that the $150,000 gain will be paid for by someone in the future. In other words, our gains will become the liabilities for future generations. That is the sad truth about asset appreciation that Mr Ang doesn’t seem to understand. There is no free lunch in this world. Money doesn’t drop from nowhere. You can’t have 85% of Singaporeans suddenly becoming $150,000 richer just like that. Their riches will have to be paid for by their children and their children’s children. Wiping off the $150,000 increase in flat price will also wipe off the $150,000 increase in liabilities for future generations. So it is no more detrimental than it is beneficial to future generations. A responsible government will recognise that and actively control flat prices. An irresponsible government will peddle the asset enhancement fallacy without telling us its detriment to future generations.

Mr Ang dreams of the magic combination of affordable new flat price without any impact on resale and private property prices. Such wishful thinking shows Mr Ang’s lack of understanding of the close intertwining of the various property market segments. Even Mr Mah acknowledges the close relationship between new flat price and resale flat price.

Mr Ang asks if government measures thus far are balanced between existing and aspiring home owners. The fact that resale flat prices are up $150,000 on average over the last four years is an obvious indication of the government’s skew towards existing home owners to the detriment of home aspirants both now and in the future.

Mr Ang asks if more can be done to help aspiring home owners and whether this can be done without going against the principle of self-reliance. It is funny that Mr Ang should be concerned with the principle of self-reliance when he is defending the ‘windfall’ $150,000 increase in flat values. If Mr Ang truly believes in self-reliance, he should ask the people to work for the $150,000 and not depend on property prices to shoot up by $150,000 which ends up being paid by someone else instead.

Mr Ang asks if the opposition’s proposal will not crash the market. The opposition has proposed a target. But the route to that target can be gradual so that the market will not crash.

Mr Ang claims that rising home prices was not brought about by Mr Mah or is the fault of the ruling party. He says it is driven by a booming economy and by a prospering middle class. Mr Ang should know his property indexes more thoroughly. During the global financial crisis year of 2009, while GDP contracted, HDB prices actually rose rather than fell. So clearly, a booming economy is not the main reason why home prices have shot up. At the end of the day, it is still demand and supply that determine prices. Since demand from immigrants and supply from HDB are determined by the ruling party and Mr Mah respectively, Mr Ang’s claim that this has nothing to do with them is highly unbelievable.

Mr Ang points to China and Hong Kong where the price of housing is also a hot issue and asks why these places have not implemented opposition proposals? Perhaps Mr Ang can see that as a testament to the ingenuity of the opposition proposal?


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