SINGAPORE: In the wake of the debate in Parliament earlier this month on housing, Workers’ Party MP Jamus Lim (Sengkang GRC) posted on Facebook about why the price of a home is too high, and how this affects Singaporeans’ retirement.
He also made the point that reserves are tapped to fund larger housing grants, adding that “It’s robbing Ah Seng to pay Ah Huat.”
In his Tuesday night (Feb 21) post, Assoc Prof Lim underlined the WP’s stand that the government must strengthen efforts to ensure that housing remains affordable and accessible.
He raised the point that as flats get more expensive, this has an effect on Singaporeans’ retirement.
“This stems from the fact that most Singaporeans use their CPF to pay for their HDB mortgages…
The problem is that it now conflates two differing objectives: high prices mean higher returns for retirement (good), but it also means that it’s harder for couples starting out to get a roof over their heads without breaking the bank (bad),” he wrote.
While in theory, assets such as HDB flats that expire after 99 years should gradually decrease in value, this is not the reality, partly due to current inflation levels.
“What have inflation and rental rates have been recently? No prizes for guessing what increases of more than 20 percent last year—and an anticipated 10-15 percent this year—might do to resale prices (and, by extension, BTO valuations, which take reference from resale).”
Assoc Prof Lim added that the government’s current approach also has an effect on its finances.
“Over time, inflated house prices mean higher grants to make up the difference. Where does this money come from? In part, from interest from our reserves. So on one hand, we’re propping up high land valuations—arguing that any other approach amounts to a raid in the reserves—but on the other, we’re tapping more on revenues, to fund the larger grants. It’s robbing Ah Seng to pay Ah Huat.”
The Sengkang GRC MP also explained the WP’s universal lease buyback scheme, “which will guarantee those who need to cash out at least a reasonable price. Sure, they’ll give up a windfall, but at least they’ll not be completely left out to dry. To avoid overbuilding in the short run while we’re waiting for more supply to enter the market via lease buybacks, we can operate an expanded public rental scheme, with larger format apartments that can be rented for a maximum of 10 years.”
The scheme will also help reset house prices and make their levels more sustainable.
“In the longer run, so long as incomes keep rising, the correction will eventually get washed out. Just as important, the alternative will also avoid a new bubble, that will eventually need to be corrected down the road,” he added.
Assoc Prof Lim’s post can be read in full here. /TISG
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