HDB-CPF Alliance: Trouble Ahead

This website will carry a 7-part series of articles comprising of excerpts from Dr Chee Soon Juans latest book Your Future, My faith, Our Future. Heres Part V.

While most Singaporeans accept public housing as a way of life and acknowledge that the HDB has provided many with decent housing, few stop to ask whether the alliance between CPF and HDB is a sustainable act. The release of pension savings for home financing stimulates a demand for houses that cannot continue indefinitely. The size of the flats Singaporeans buy is mainly determined by the amount of savings they have in their CPF Ordinary Account. Little thought is given to saving for their retirement years. Such behaviour is motivated mainly by the distrust Singaporeans have about the government returning them their savings when they retire. The tendency is to spend it at the first available opportunity. An acquaintance of mine told me what seemed a fair reflection of the general view of Singaporeans:

If you dont use your CPF now while you can, you may never see it again. The interest the government pays on CPF is peanuts. Once this government gets hold of your money, its hard to get it back. You wait for another 30 years to collect your hard-earned savings and the government will change its tune and give you some reason to withhold it. Singaporeans are not stupid; they dont call the PAP Pay And Pay for nothing.

This misgiving is also apparent in the younger generation. The Government has a tendency to revise the retirement age upwards every now and then, said a 27-year old research manager, What if I cant withdraw [my CPF savings] until Im 70 years old or even more? The sentiment is perversely self-fulfilling as well as it is ironic: The higher the percentage of wages the government with-holds as CPF savings, the more pervasive the peoples distrust and resentment, and therefore the more they want to use it for the immediate needs of housing, leading to a greater depletion of the savings.

Rather than stem this trend, however, the government seems to be milking it for all its worth. The upgrading programme that I mentioned earlier is by no means free. Residents have to pay between $13,400 to $24,400 for the refurbishment of each apartment.

In addition, existing smaller-sized flats in various parts of the island are being acquired and bigger ones constructed in their place under the Selective En-bloc Redevelopment Scheme. Those affected by the redevelopment are given financial compensation in the form of a small grant if they choose to upgrade to the newer and bigger apartments when construction is completed. Other financial arrangements are also available such as waiving of registration and booking fees for replacement flats, postponing of down payments of the new flats until after their completion, and providing various financial packages for lessees with the higher mortgages. The assistance, however, cannot mask the un-mistakable pattern that residents are being forced into committing to bigger and bigger mortgages.

The PAP has also decided to stop building smaller flats. At the same time, prices for the bigger units have inflated phenomenally. Between 1990 and 1998, average prices of new HDB flats rose by as much as 150 percent or more in many areas with the biggest increases registering in the first half of the decade. Has the productivity of the economy increased to allow such an escalation of housing prices or is there something else at work? The government dictates HDB flat prices, and the inflation of these prices has contributed significantly to the overall growth of economy. Academic Linda Low describes the rapid growth of Singapores economy as one artificially stimulated by the public housing programme, and one that is ultimately unsustainable.

Your Future, My Faith, Our Freedom is sold at Select Books (Tanglin Shopping Center), Kinokuniya Bookstore (Takashimaya Shopping Centre, Orchard Road) and the SDP office (1357A Serangoon Road, Singapore 328240).

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