International Business & Economy Why elevated property prices allows PAP to be politically indispensable to people

Why elevated property prices allows PAP to be politically indispensable to people

Author

Date

Category

- Advertisement -

By: Chris Kuan

This is an interesting chart from Bloomberg about Singapore household balance sheet, based on data from Singstat. A few things jump out. Bear in mind Singapore’s GDP is around $420b.

The massive savings surplus – a tad over $1 trillion in deposits, shares and securities, life insurance, pension funds and CPF. This is against just a little over $300b in liabilities – credit card, car loans, HDB loans and loans from financial institutions. If Singaporeans are asset rich and cash poor, this assumption isn’t supported by the data. Or, the top quintile is extremely cash rich leaving the rest cash poor – which is likely to be closer to the truth.

Deposits and currencies at just under $380b is the largest source of savings. This rather tell us about the contradiction in the savings habit – people are risk averse, thus keeping more than required in deposits which given the historical low interest rates, loses purchasing power due to inflation and cost of living. The banks are – well laughing their way to the bank. This explains the surprisingly high profitability of local banks despite their high capital ratios.

- Advertisement -

Next, the huge wealth locked up in housing. Over and above the savings surplus, households have $440b worth of public housing and $410b worth of private housing giving total housing assets of $850b, bigger than the net savings, let alone CPF.

Given the numbers, we should be little surprised that the huge amount of wealth locked in housing is a temptation few politicians including ours, can resist. Hence the burden of financing healthcare and retirement spending is shifted from the government towards households through its control of the land bank.

By doing so this also gives the government easy fiscal policy options through which it targeted politically expedient spending (i.e. taking away your household savings on one hand through housing and then provide benefits if you do not have enough to retire or to take care of your health) making you dependent on government largesse.

You should know why elevated real estate prices and monetizing the value of housing is such a cornerstone of government policy – they give it the means to be both fiscally sustainable and the PAP to be politically indispensable to the voters. But fiscal sustainability and political expedience do not come without consequences. Just don’t mention who gets to bear them.

Send in your scoop to news@theindependent.sg 

Please follow and like us:
- Advertisement -

Very risky to open up for CNY in Singapore – as Covid-19 and new variants rage elsewhere

  Here we are at a very interesting week – with a couple of events both local and abroad which have repercussions for what lies ahead. Decisions, decisions, decisions. There’s Donald Trump. He’s out. Maybe not down yet. He says “We’ll be back.”...

Speaker Tan Chuan-Jin’s photos used to catfish Tinder users

Singapore — Speaker of the Parliament Tan Chuan Jin posted on social media on Friday (Jan 21) about his photos being used as catfishing material. Mr Tan shared on his Instagram and Facebook pages that his images have been used on the...

8 unique travel trends to watch out for in 2021

Singapore - After the pandemic put most of global travel on hold, the tourism industry is going through some serious revamping. Despite having to contend with strict restrictions and spending a lot of time cooped up at home, people are still...

Send in your scoop to news@theindependent.sg 

Please follow and like us: