A reply to Ms Mabel Tan’s letter: “How family’s fortunes have grown over the years”
September 29th, 2009 | 
Author: I refer to the letter “How family’s fortunes have grown over the years” by Ms Mabel Tan dated 26 Sept 2009. (read letter here)
Ms Tan’s bemusement is understandable. She is bemused because she and her family are totally unencumbered by the recent sharp increases in property prices. Like the person watching a fire from the safety of the opposite bank of a river, she feels neither anxiety nor pain.
She shares with us her good example of being able to stay with her in-laws for 8 years and so she expects everyone else to be able to do so. But I know of a colleague whose husband slept in the living room of his parents’ flat before their marriage because his family was too big.
Does Ms Tan expect my colleague to sleep in the living room of her parents-in-laws’ flat? Ms Tan shouldn’t have moved out after 8 years but should have continued to stay with her in-laws to uphold the example she had been setting.
Ms Tan claims that her family’s fortunes have ‘grown’ over the years, but she provides no details as to how it has actually grown. Let’s see, there is no doubt that from a one-room flat to a four-room flat, Ms Tan’s parents have benefitted from asset inflation. But has Ms Tan’s extended family benefitted as a whole?
Let’s say for simplicity’s sake, Ms Tan’s parents’ flat appreciated from $30,000 to $300,000, that’s a cool $270,000 that Ms Tan’s parents pocketed over the years without doing anything. But what about Ms Tan and her siblings?
If the price had stayed at $30,000, Ms Tan and her siblings would have been able to snap up units at $30,000 each only. But because of asset inflation, Ms Tan and her siblings now have to fork out $300,000 each.
In fact, Ms Tan and her two siblings would have to fork out a total of $900,000 instead of $90,000. Collectively, they would have paid $810,000 more. The extra burden of $810,000 that Ms Tan’s generation has to bear far outweighs the gain of $270,000 that her parents pocketed.
So that is the truth behind the fallacy of asset appreciation. We can of course adjust all prices for inflation but what this simple example illustrates is this: the so-called gain from asset appreciation of one generation will be borne by the future generation. It becomes a debt for the future generation to bear. Unless salaries can keep up, that debt will keep increasing and increasing until it becomes totally unbearable.
Thank you
Ng Kok Lim
Posted in 25 Responses to “A reply to Ms Mabel Tan’s letter: “How family’s fortunes have grown over the years””
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forgive ms Mabel Tan…she belongs to those many short-sighted S’poreans around…these people would vote for PAP again and again with the pre-election freedies…maybe one day they would wake up through witnessing their children/grandchildren suffering under the exorbitant cost of servicing huge housing debt…end of the day that 270k false wealth is better not to have in the very first place…
Bravo for a fine rebuttal!
You have the gift of the gab. Perhaps you can consider joining politics!
Only way to benefit from asset appreciation is to sell the Singapore house and move to another country where housing is much cheaper. I guess this is what a lot of Singaporeans who have migrated have done. If I’m a PR I will do this and buy a big bungalow back home.. no??
my chinese pr friends all have in mind of making 100-200k when sold for their homes bought few years ago. once it done, off they go back to china for retirement.
perhaps, Miss Tan does not realised the complication of not only the non substance inflation increament but also others issue like leading to ppl of new generation not being able to afford. what she quoted is based on her parents time and not the future young generation of singaporean to come.
Well-articulated. It makes so much sense that there is no way to counter the argument. Hope that this will be publicized in the papers.
I envy Malays who don’t mind living in JB bungalows for cheap.
Imagine if they Withdraw All CPF that alone can give them retirement package and room with a view not long kang, not that there is one.
Other than Singapore, which country allows foreigner like PR to buy public housing ???? In the goal of achieving high GDP figures, government just open the flood gate and allows our properties to be inflated beyond the mean of many Singaporeans!!! The question we should ask is our PM doing enough for locals ????
has the shameless times printed this reply in their toilet papers?
Are we really better off when compared to others? Please read the following….
Economics focus
Measuring what matters
Sep 17th 2009
From The Economist print edition
Man does not live by GDP alone. A new report urges statisticians to capture what people do live by
Illustration by Jac Depczyk
HOW well off are Americans? Frenchmen? Indians? Ghanaians? An economist’s simplest answer is the gross domestic product, or GDP, per person of each country. To help you compare the figures, he will convert them into dollars, either at market exchange rates or (better) at purchasing-power-parity rates, which allow for the cheapness of, say, haircuts and taxi rides in poorer parts of the world.
To be sure, this will give you a fair guide to material standards of living: the Americans and the French, on average, are much richer than Indians and Ghanaians. But you may suspect, and the economist should know, that this is not the whole truth. America’s GDP per head is higher than France’s, but the French spend less time at work, so are they really worse off? An Indian may be desperately poor and yet say he is happy; an American may be well fed yet fed up. GDP was designed to measure only the value of goods and services produced in a country, and it does not even do that precisely. How well off people feel also depends on things GDP does not capture, such as their health or whether they have a job. Environmentalists have long complained that GDP treats the despoliation of the planet as a plus (via the resulting economic output) rather than a minus (forests destroyed).
In recent years economists have therefore been looking at other measures of well-being—even “happiness”, a notion that it once seemed absurd to quantify. Among those convinced that official statisticians should join in is Nicolas Sarkozy, the French president. On September 14th a commission he appointed last year, comprising 25 prominent social scientists, five with Nobel prizes in economics, presented its findings*. Joseph Stiglitz, the group’s chairman and one of the laureates, said the 292-page report was a call to abandon “GDP fetishism”. France’s national statistics agency, Mr Sarkozy declared, should broaden its purview.
The commission divided its work into three parts. The first deals with familiar criticisms of GDP as a measure of well-being. It takes no account of the depreciation of capital goods, and so overstates the value of production. Moreover, the value of production is based on market prices, but not everything has a price. The list of such things includes more than the environment. The worth of services not supplied through markets, such as state health care or education, owner-occupied housing or unpaid child care by parents, is “imputed”—estimated, using often rickety assumptions—or left out, even though private health care and schooling, renting and child-minding are directly measured.
The report also argues that official statisticians should concentrate on households’ incomes, consumption and wealth rather than total production. All these adjustments make a difference. In 2005, the commission found, France’s real GDP per person was 73% of America’s. But once government services, household production and leisure are added in, the gap narrows: French households had 87% of the adjusted income of their American counterparts. No wonder Mr Sarkozy is so keen.
Sizing up the good life
Next the commission turns to measures of the “quality of life”. These attempt to capture well-being beyond a mere command of economic resources. One approach quantifies people’s subjective well-being—divided into an overall judgment about their lives (a “ladder of life” score) and moment-by-moment flows of positive and negative feelings. For many years researchers had been spurred on by an apparent paradox: that rising incomes did not make people happier in the long run. Recent studies suggest, though, that countries with higher GDP per person do tend to have higher ladder-of-life scores. Exactly what, beyond income, affects subjective well-being—from health, marital status and age to perceptions of corruption—is much pored over. The unemployed report lower scores, even allowing for their lower incomes. Joblessness hits more than your wallet.
Third, the report examines the well-being of future generations. People alive today will pass on a stock of exhaustible and other natural resources as well as machines, buildings and social institutions. Their children’s human capital (skills and so forth) will depend on investment in education and research today. Economic activity is sustainable if future generations can expect to be at least as well off as today’s. Finding a single measure that captures all this, the report concludes, seems too ambitious. That sounds right. For one thing, statisticians would have to make assumptions about the relative value of, say, the environment and new buildings—not just today, but many years from now. It is probably wiser to look at a wide range of figures.
Some members of the commission believe that the financial crisis and the recession have made a broadening of official statistics more urgent. They think there might have been less euphoria had financial markets and policymakers been less fixated on GDP. That seems far-fetched. Stockmarket indices, soaring house prices and low inflation surely did more to feed bankers’ and borrowers’ exaggerated sense of well-being.
Broadening official statistics is a good idea in its own right. Some countries have already started—notably, tiny Bhutan. There are pitfalls, though. The report justifies wider measures of well-being partly by noting that the public must have trust in official statistics. Quite so; which makes it all the more important that the statisticians are independent of government. The thought of grinning politicians telling people how happy they are is truly Orwellian. Another risk is that a proliferation of measures could be a gift to interest groups, letting them pick numbers that amplify their misery in order to demand a bigger share of the national pie. But these are early days. Meanwhile, get measuring.
Report by the Commission on the Measurement of Economic Performance and Social Progress”. Available at http://www.stiglitz-sen-fitoussi.fr.
unfortunately,most ppl aren’t trained in econs 101
money illusion from seeing an extra zero in the price over the years cause them to believe that their asset has appreciated when they forget about inflation,opportunity cost and supply/ demand. as ppl like to say “mata (police) wear shorts in those days”
Aiyah . . .
Stop wssting time lah.
Singapore is still better than many, many countries out there.
Any fool knows that.
We can write till the cow comes home but would Singaporeans trade Singapore for ???????
Hey Kamal,
Did you tell 1000 Singaporeans who have left Singapore every year that Singapore really better than many countries out there?
These are educated, talented, mobile Singaporeans but why are they are so foolish to leave?!?!?
Please remember that PAP claimed that Singapore is in first world and our leaders are receiving few 100% more than first world leader. So stop using third world countries as our benchmark !!!!!
//Kamal
explain the emmigration rate to me then
/Kamal
Better in what? Please explain instead of regurgitating the same crap that has been fed to us time and time again.
Agreed that the ballooning property prices doesn’t really benefit any buyer per se. However, the bigger lesson is that one should live within their means and not over-extend.
For those who desires to own a big flat when they could ill-afford it, I spare no pity for them when their flat is re-possessed by HDB when they could no longer afford the monthly mortgage. They deserve it, in my opinion. Living beyond one’s means and blaming others for subsequent problems is a sin.
Mabel?
What she is describing is nothing compared to the wealth that you can measure that Taiwan Chen had hidden over 8 yrs reign?
Taiwan must be a good place to let chen hide so much monies.
As if what she cited are absolute indicators of good governance.
Hey guys, stop applying pressure on Kamal or
he’ll turn around and challenge you to emigrate:
“GET OUT OF MY PARADISE !!!”
we will vote him out of his paradise and turn it into our paradise
The funny thing about the whole thing LHL/LKY is trying to do over the last 2 decades was:
1. they alienated themselves from the class of workers who used to revere them. Now, they hated the 2 of them.
2. their relentless drive to push up property prices only serve the rich people in Singapore ever richer without having to do any work. These rich folks also pay them lesser and lesser from the lowering of tax rates that LKY/LHL have imposed.
Such are unintended consequences of LKY/LHL.
// To karmal
■Kamal on Tue, 29th Sep 2009 9:44 pm
karmal said:
“”Aiyah . . .
Stop wssting time lah.
Singapore is still better than many, many countries out there.
Any fool knows that.
We can write till the cow comes home but would Singaporeans trade Singapore for ???? “”"
I say:
Haiyah..
Stop spouting rubbish lah.
Singapore is still WORSE than many, many, many countries out there too.
Any INTELLIGENT SMART person knows that.
Of Course! Give me an Canadian, Australian, New Zealand, French, citizenship anytime!
“Ms Tan claims that her family’s fortunes have ‘grown’ over the years, but she provides no details as to how it has actually grown”.
1) Location location location. Her one-room flat is probably in a central area, the three room further out and we know her four room is in CCK.
2) Actually if you understand property prices, her fortunes have technically not grown. If you buy back into the same market, you will not make any profit. and you have to incur buying and selling costs.
The only way she benefited is because she is hedged against the rising market because she already owns a property.
Property becomes unaffordable when prices rise faster than income; however if you have already bought into the market the “gap” you are exposed to is smaller.
For example her income is $100, a 1 room costs $1000 and a 2 room costs $2000. Let’s say the market grows by 10%. Now a 1 room costs $1100 and a 2 room costs $2200.
For a person who doesn’t own a property, he has to cough up the entire $200 extra, or two years income from his own pocket. However since she owns a 1 room, she sells it for $1100. Now she needs another $1100 to cover the difference.
Compare this $1100 to the original price difference of $1000 ($2000-$1000), she only has to cough up $100 extra as compared to someone that doesn’t already own a property.
Essentially she is only exposed to half of the price increases when “upgrading” as a result of hedging.
Just for clarification, the guy without a property will have to pay the full price increase ($2200-$2000) = $200.
So compare $100 vs $200.
FPC, as far as I know, Chen Shui Bian’s corruption case only amounted to a couple of millions dollars. $1 to $2 million over 8 years! That’s pathetic compared to what the PAP ministers are getting – $2 to $3 million every year!
So it’s actually cheaper to have a corrupted President like Chen Shui Bian than so-called “uncorrupted” ministers like ours who take so much more money openly.
Kamal,
Your logic is skewed because you’re assuming that Singapore can only be this way. That is, we must have all the nonsense from the PAP in order to enjoy prosperity as well.
But that is so false. The government has changed in Taiwan, Korea, Hong Kong and Japan. In all these cases, prosperity continues and in fact blossoms further.
So Singapore can definitely continue to prosper with or without the PAP.
That’s for sure. They need us but we don’t need them. And they know it.