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Wong Wee Nam
Housing is a basic need, it is a consumption. But when it is treated as a speculative investment, it becomes a source of status, inequality and social division. For years, Singaporeans have been conditioned to see public housing as a sure-fire investment.
All the talk about asset enhancement has made them think that having a flat is a sure way to generate wealth in the shortest possible time.
The truth is one can only profit from the sale of the house if one owns more than one property or if one decides to cash out and leave the country.
Singaporeans need to realise that in a country where 85 percent of the people live in public apartments, the deleterious effects of spiraling prices and increasing unaffordability of HDB flats have far-reaching consequences.
Today, many young couples are finding it increasingly difficult to purchase their first home. They put off marriage and starting a family. This is also a major factor for the plummeting birth rates in recent years. The dire consequences of a low birth rate in conjunction with a rapidly aging population are all too well documented.
The Government has tried for many years to persuade our younger generation to have more children but without success. Controlling excessive property speculation is, therefore, one of the key factors to resolving our low birthrate problem. It is also crucial in preventing, or at least cushioning, a property crash when the bubble bursts.
High HDB prices do not affect only the young. They also affect the older generation. When the PAP Government claims that public housing remains “affordable”, it simply means that Singaporeans must work for 25 to 30 years in order to service a housing loan for that amount of time. And we are talking about dual income of both spouses.
It does not matter that at the end of the period, many Singaporeans find themselves with little to retire on, having used the bulk of their CPF savings to service their housing loans. The social costs are tremendous. Not only do the large loans whittle away people’s retirement savings, they also erode funds needed for healthcare needs and their children’s education. This is especially severe for people in lower-income groups.
Affordability means that one’s earnings are enough for basic expenses which must include paying off a housing loan and putting aside an amount for retirement. If housing costs so much that little is left for retirement, then public housing is unaffordable.
Thirty years ago, the moment you come out to work, you could confidently start looking for a house, even on one income. You take a loan for only fifteen years. Now that is called affordable.
High property prices not only make housing unaffordable, they also make life very expensive for everyone. When there is asset-inflation, our workers must be paid more so that they can meet their expectations of owning a home and paying off their mortgages. People who are self-employed will also want to earn more. With asset-inflation and high property prices, the cost of doing business must go up as rentals will move up in tandem. This is the reason why Singapore is such an expensive city.
The high property prices must, therefore, be ultimately passed on to the consumers. If a company has to pay higher wages and rental, the prices of goods and services will go up. It will also have to look for cheap foreign labour to remain viable.
This means that Singaporeans will also have to pay more for their daily necessities and what they consume. Worse, they may also be in danger of being replaced by cheap foreign labour at a time when they still have to service their loans.
In such a scenario, it is the lower income group, the students, the housewives, the retirees, the aged and the unemployed who will suffer most. Those who are employed have better pray that they have skills that are not easily replaced by lesser talents from overseas.
The problem will be further compounded when the high property price leads to speculation.
HDB flat owners are only rich on paper. The lucky people who really benefit from high property prices are the banks who lend out the money, the lawyers who do the conveyancing, the developers who build, the people who own more than one property and the government who collect all the various dues.
High property prices not only affect the present generation. The wealth that the present generation reaps from their property is being paid for by the next generation.
After Singaporeans have paid off their mortgages, who do we sell our flats to? We can only sell them to the next generation of Singaporeans – our children. In other words, our children will have to pay for our illusory wealth. Can we blame them for not wanting to have more children, particularly in a city that is over-crowded and stressful?
It is inevitable that all bubbles must eventually burst. High property prices not only bring inflation during their dizzy heights, they also cause economic woes when they fall. We want to prevent that.
Unaffordable housing also has dire, albeit indirect, economic effects. Huge mortgages discourage risk-taking and stifle entrepreneurship. This in turn stunts the small and medium enterprises (SME) sector of the economy. High property prices funnel money from productive sectors of the economy into the rent-seeking sector, creating and entrenching a
rentier economy with its attendant problems – asset bubble creation, lack of regenerative dynamics, stagnant wages, structural unemployment, widening income inequality, etc.
The high housing cost is a financial millstone around the necks of many Singaporeans. This is a huge obstacle to Singaporeans living a fulfilled life. We must get our people to wean themselves off the addiction to property as a means to wealth and turn their minds to more creative ways of making money.
Dr Wong Wee Nam is a medical doctor and a member of the SDP’s Healthcare Advisory Panel.