The banana and your HDB flat

December 10, 2009
Singapore Democrats

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Singapore Democrats

One stall sells bananas for 50 cents each. Another prices them at $1 but posts a sign: “Buy One Get One Free!” Who do you buy from? Unfortunately many shoppers are attracted to the latter.

It is this psychology that the PAP preys on when it says that HDB flats are subsidized: Jack up the price of the flats and then sell them at a “discount”. This way, the Government calculates, Singaporeans will be eternally grateful for the make-believe assistance.

Here’s how things work in reality. The Government owns most of the island. From time to time it puts out parcels of land for sale and invites private developers to bid for them. (“Private” is used very loosely here as some of these real estate companies are GLCs).
The Government then sells land earmarked for HDB flats to the HDB at a lower price (say, 60 percent) of whatever amount the successful private bid comes to. In other words, the PAP claims, HDB land is subsidized (by up to 40 percent).

Deliciously diabolical, isn’t it? The Government, in the form of the HDB, “purchases” the land from itself, factors the amount into the price of flats, makes a tidy profit from Singaporeans and then claims that it subsidizes the flats!

But so what if the Government makes a bit of money on the side? Does it not provide nice, clean housing at an affordable rate, you ask?

“Affordable” is a rather malleable word. While the Minister for National Development never fails to assure Singaporeans that they can afford the flats, he doesn’t let them in on a secret: They really can’t.

Most Singaporeans use the main bulk of their CPF savings to pay for the HDB loans that they take for their flats. They usually take up to three decades to finish paying up the mortgage – just in time for their retirement.

Lest anyone forgets, the CPF is a retirement savings scheme. It started off as one, anyway. It has since morphed into a housing, investment, medical and insurance fund all rolled into one. But that’s another story.

If you have to use your retirement funds to buy a flat so that you end up with nothing to retire on, it means that you cannot afford the property. All you are doing is to party now but pay for it later, a practice which many retirees are unfortunately finding out the hard way.

The really scary thing is that most Singaporeans don’t know that they don’t have enough to retire on. Those who do just worry.

And work. The Government now tells everyone to retire later. Better still, don’t retire at all.

What about those who cannot work? You hope that you have children rich enough to look after you.

And if you don’t? There’s always the sidewalk.

In the meantime, Mr Lee Kuan Yew boasts how our reserves have expanded from $3 billion to $300 billion and the ministers get invited to places to teach others the wonders of the HDB system.

Affordability means that the amount of money you earn every month is enough for your basic expenses which must include paying for your housing loan and putting aside an amount for retirement. If the housing portion is so large that it leaves nothing for you to save for your retirement, it means that you can’t afford the flat. That’s the unpalatable truth.

In a perfect world the opposition and the media would have alerted the people to this abuse. But alas, we’re not even living in a democratic one. As a result the PAP continues to get away with the humbug.

(Did someone say that civil liberties have nothing to do with our economic well-being?)  

So the next time the Government tells you that your flats are subsidized and that because of this the HDB continues to run a deficit, think of the guy who sells you a banana and offers the other one free.