This week, the price of Housing Development Board (HDB) flats dominated the news with the People’s Action Party’s (PAP) Sim Ann, the Progress Singapore Party’s (PSP) Leong Mun Wai, and even the wife of Prime Minister Lee Hsien Loong, Madam Ho Ching wading in.
PSP’s Mr Leong, who is a Non-Constituency Member of Parliament (NCMP) had written in a much-shared Dec 8 Facebook post that “land costs should be taken out of the picture” and that “the time has come for us to question whether even our public housing policy has lost its way.” On Dec 10, Senior Minister of State for National Development Sim Ann responded, asserting that most flat buyers use around four to five years of their total household income to pay for BTO homes, while in other global cities, the home price to annual income (HPI) ratio ranges “from 8 times to well over 20 times.”
In other words, Sim Ann is saying that Singaporeans have a much better deal as compared to people in other global cities.
Firstly, I would like to credit Ms Sim and Mr Leong for being able to publicly and professionally discuss an important issue without mud-slinging or veiled personal attacks. It is important that issues that affect Singaporeans at large can be openly questioned. This allows the public to focus on the issues without the distraction of party politics.
While Ms Sim’s reply was detailed, there is one question that comes to mind. She has compared Singapore favourably with other global cities in terms of the percentage of household income being used to pay for flats. What remains unclear however is what sort of property she is comparing BTO flats with. It is imperative to remember that HDB flats in Singapore are not freehold.
According to the HDB website, HDB flats are sold on 99-year leases, and flat buyers are informed at the time of purchase. The 99-year lease serves the needs of the owners and their children while ensuring that land can be recycled to house future generations. Like all leasehold properties in Singapore, the flats will revert to HDB, the landowner, upon the expiry of their leases. HDB will in turn surrender the land to the State.
This means that, effectively, HDB flat buyers do not own the flats outright. They merely own it for 99 years. This may not be the same in those global cities that Ms Sim has compared Singapore to. It could well be that in those other global cities, people are buying a property outright to be owned in perpetuity. Is Ms Sim comparing like for like when using this example?
Among other things, Madam Ho noted that a S$360,000 three-room flat with 60 years left on the lease is like paying S$500 a month rental over 720 months. Today’s dollar means we haven’t factored in inflation. “By paying upfront, we more or less assure ourselves that we continue to have a roof over our heads and a home even as our incomes decline post-retirement.” At the same time, flat owners don’t have to be subjected to unpredictable market forces and end up paying higher and higher rentals. “And if the economy does well, and the island is safe and secure with high stability and trust index, our housing assets will appreciate in our lifetime.”
However, Madam Ho has neglected to mention one point. When you rent a property, the landlord is responsible for maintaining the interior of the property. The landlord has to ensure that everything within the flat works properly. Many landlords even provide furniture. When one buys an HDB flat, they are responsible for the maintenance of their own flats without the safety net of a landlord being responsible for such matters in exchange for rent.
Basically, in buying a flat, it could be said that we are renting a flat for 99 years while being responsible for its maintenance as well. So once again, is Madam Ho comparing like for like?
At the end of the day, HDB prices are a hot-button issue because having a home to live in is a basic need and the PAP has always promised Singaporeans affordable housing as part of their campaign.
Of course, many of the things that have caused prices to soar are not things that the Government can control. However, in trying to convince Singaporeans, should we try to compare like for like?
Among other things, Madam Ho explained that land in Singapore is treated as a resource tied to the reserves.
“Singapore is a small island without resources. This is why for sustainable and fair stewardship, land is treated as a past reserve……Under our procedures for managing past reserves, land must be sold at fair market value and the proceeds locked up as past reserves.”
She further explained that if Singapore is run poorly and becomes a “junk bond country,” the land value will fall sharply as people lose hope and investors flee with jobs. Meanwhile, if the country is run well and continues to invest in its infrastructure, people, peace, stability and security, then the land value appreciates.
At the end of the day, whatever the economic and intellectual debate between politicians, the fact remains that Singaporeans are concerned about the rising costs of living, the rising costs of HDB flats being one of them.
On Dec 1, the Economist Intelligence Unit (EIU) ranked Singapore as the most expensive city, with New York sharing the number one spot. It is the eighth time in a decade that the Little Red Dot has taken pole position.
Food guru and Makansutra founder Kf Seetoh commented on this in a Facebook post on Sunday (Dec 11). “Check..we are the most expensive city in the world hor, not the richest ah. Now u know why your wallet so empty. Wonder who or what we owe this award to. But we are the world’s cheapest food city fr a developed nation. Count your blessings, thank your favourite hawkers.”
This surmises the fears of Singaporeans well. No matter what politicians may say, Singaporeans are struggling with costs. Perhaps, our politicians can go one step further beyond intellectual explanations and lead by example.
New Malaysian Prime Minister Anwar Ibrahim has announced that he is forgoing his salary as PM saying that he would not accept his salary in solidarity with the Malaysian people as they rally to deal with high living costs.
Perhaps Ms Sim could try this, even just for a few months? Or Madam Ho’s husband, the PM?