Gathering
extracts from The Straits Times articles on Budget 2013, this essay discusses
the government’s spending on housing for the future. Budget 2013 calls for a
need to “relook housing policies for the future” as National Development Minister Khaw Boon Wan is casting his eye on the
desired future of public housing in the decades to come.
Singapore’s public housing system, unique for its HDB flats, is often
touted as a model for other countries due to its land constraints. But as the
economy has recovers from the 2008 recession, public housing prices have
skyrocketed as consumers have greater purchasing power hence there would be a
greater demand for houses as more people have the ability to afford, hence,
putting upward pressure on housing prices which makes it difficult for the
lower income families to buy a flat on the resale market. Thus theres is a need
for government to intervene because there is growing inequality as housing is a
basic necessity, yet the lower income family are unable to afford it. Additionally,
the immigration policy in Singapore led to an astronomical increase in
population which in turn result in a skyrocketed demand for affordable public
housing. With such a mis-match in supply and demand whereby there is limited
supply while demand keeps increasing, prices of HDB flats naturally boomed due
to the upward pressure on the initial equilibrium price. According to
statistics from the HDB, in 2008, it built only 3,183 new flats when the
government welcomed over 90,000 permanent residents (PRs) and 20,000 new
citizens in the same year.
Notably, HDB resale prices had doubled over the past 7 years and it is
at its peak now with resale price index of 205.4 compared to 101.8 in 2006.
With this in mind, the Singapore government has been exploring ways to make
public housing more affordable. Singapore has implemented a few cooling
measures in the housing sector such as giving housing grants to newlyweds to
ease their which proved to be ineffective because the prices of HDB flats are
still on the rise thus resulting in these grants having little impact on the
easing of the high prices. Hence there is an even greater need for the
government to step in because the market forces has failed to allocate
resources efficiently.
The four key questions raised by Khaw was therefore:
- Should HDB flats continue to be an appreciating asset or return to being treated simply as a social need?
- Should the HDB build to meet sophisticated tastes or go back to basics?
- How to keep flats affordable while continuing to encourage couples to be prudent?
- How should public housing respond to the needs of an ageing population?
On the notion that HDB flat as an asset, Mr Khaw noted that that was never the intention of public housing when it first started as “having basic, no frills, low cost homes was the top priority” at the time. “A relook is however necessary in the light of significant demographic and economic changes. The primary mission of HDB to offer an affordable flat for the majority of Singaporeans will remain unchanged.”
But his suggestions to reboot Singapore’s public housing system drew
mixed reactions from the market, as although it could be one way to bring down
the prices of new flats, Mohamed Ismail, CEO of PropNex Realty, the biggest
real estate agents firm in Singapore stated that “by reverting to the leaseback
policy, which is the old housing policy, Singaporeans are then reduced to being
long-term tenants for the property that they have and at the end of it they do
not own an asset and with minimal capital gain.”
Others have also stated that it would effectively shut down the resale
market.
Mr Khaw has clarified that the options would only apply to new buyers,
and not existing flat owners as besides making public housing affordable to new
homeowners, the interest of existing homeowners will not be neglected as well.
The government should weigh the costs and benefits of implementing such
a policy - the rebooting of Singapore’s public housing system. If the benefits
outweigh the costs and is effective in cooling the increasing property prices,
then the government should go ahead with the suggestion.
Ultimately,public housing
should remain a social need and that everyone should be able to afford public
housing. As such, the government has in place the Additional CPF Housing Grant
(AHG), introduced in 2006, helps to ease the financial burden of low-income
families buying their first flat. Currently, families earning not more than
$5,000 a month can qualify for AHG of up to $40,000. The Special CPF Housing
Grant (SHG), which is given over and above the regular housing subsidy and the
AHG, was introduced in March 2011 to help low-income families purchase their
first flat. Furthermore, the
government has intervened to make public housings more affordable encouraging those
with higher income go for private housing and not compete for a relatively
cheaper HDB with those who really needs them
Moreover,
the government needs to take into account the changing demographics of the
country. Singapore faces the problem of aging population and it is paramount
that the government is able to cater housing to both the young married couple
and the elderly and allocate enough resources to both groups of citizens.
Singapore government has been quick in recognising this, thus they have implemented
the Ageing-in-Place Priority Scheme (APPS) in March 2012 to help elderly
age-in-place. The
APPS facilitated the elderly who wish to sell their bigger flats and move to a
smaller studio apartment while remaining in their current town, so they can
age-in-place in a familiar environment. Currently, there has been many
complains that many young married couples have to wait many years just to buy a
house. As such, the government has stepped in with Parenthood Priority Schemes
under which 30% and 50% of the flat supply under BTO and the Sale of Balance
Flats respectively are set aside for allocation to first-timer families with at
least a Singapore child aged below 16 years old. Perhaps the government should
do more for couples who just got married and do not yet have children,
especially if they are trying to encourage young people to get married earlier
as housing could be a source of hindrance that is stopping them from getting
married. Reading Sources:
http://www.hdb.gov.sg/fi10/fi10320p.nsf/w/AboutUsPublicHousing?OpenDocument
