Mah: “Not meaningful” to compare to prices of flats in the past
From our Correspondent
National Development Minister Mr Mah Bow Tan has chided Singaporeans for comparing prices of public housing today with those 20 years ago.
Referring to the benchmark to ensure that a household pays less than 30 per cent of its monthly income to service a home loan, he said:
“We’ll keep the prices such that they are pegged to the income, so this is how we manage affordability. We make sure that the prices do not exceed the 30 per cent benchmark.”
As for comparing prices with those of 20 years ago, ‘those are not meaningful comparisons’.
“If we did that, we’d be comparing many things that we did 20 years ago, do we want to go back 20 years?” he added.
Mr Mah also reminded Singaporeans that the system had enabled them to own an “asset”:
“If you want to argue it’s too high, you can use all sorts of arguments,’ he said. The main point is this is part and parcel of a financial system that will allow people to own an asset.
This asset, the home, enables owners to monetise it for income later in life, he said. This may involve selling the property or applying for the HDB’s lease buyback scheme, which gives homeowners a source of retirement income.”
Though the prices of HDB flats has sky-rocketed over the last twenty years, few owners are able to monetize it for income unless they emigrate to another country since they still have to fork out cash to buy another property at a higher price which will plunge them into greater debts.
A recent study done by two NUS professors Abeysinghe and Gu Jiaying showed clearly that “higher property prices, instead of creating a wealth effect, exert a significant and negative “price effect” on consumption expenditures leading to a fall in the average propensity to consume.” (read article here)
As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans.
Furthermore, one really “owns” an asset if he/she is able to pass it down to descendents. While HDB’s lease buyback scheme does ensure homeowners a monthly source of income, it will also mean giving up the ownership of their property. After paying and “owning” the flat for many years, they suddenly find themselves left with nothing to leave their children.
The need for HDB to introduce the lease buyback scheme is a clear indication that Singaporeans are overpaying for HDB flats to the extent that they do not have enough savings left for their retirement.
If HDB flats are indeed easily affordable, Singaporeans should be able to repay the loan within 10 to 20 years with a substantial amount of savings left for their golden years. They will not need to lease back their flats to HDB for that pittance of monthly income.
Mr Mah does not seem to understand that the 30 per cent benchmark cannot be used as an arbitrary figure to determine housing affordability which should be linked to other factors such as the cost of living, retirement planning and a country’s welfare system
As Singapore does not have a social safety net to speak of, it mandates that Singaporeans save more to prepare for old age when they are expected to work for lesser hours and more prone to illness.
Perhaps Mr Mah should provide us with the figures of the number of Singaporeans who are able to complete paying their housing loans twenty years ago compared to now for a more “meaningful comparison” instead of blindly quoting the thirty per cent benchmark.
The gist of Mr Mah’s message is clear: Singaporeans should stop comparing things now to the past, the prices of HDB flat will continue to increase and there’s little he can do about it other than the blanket reassurance that the government will continue to “ensure affordability”. After all, there is a huge world of difference in the pay of Mr Mah twenty years ago compared to now.
Related articles:
>> Part 1: Singaporeans do not own their HDB flats
>> Part 2: HDB flats are not affordable to most Singaporeans
>> Part 3: HDB flats do not generate wealth for Singaporeans
>> HDB uses unknown “benchmark” to assess affordability of flats
>> High cost of HDB flats a key reason for low birth rates by Jeremy Koh and Eugene Yeo
>> Mass market buyers now inflating property prices by Jeremy Koh
>> Record home sales: a boom or bomb in the making? by Jeremy Koh and Eugene Yeo
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BuiTaHan on Fri, 2nd Oct 2009 9:32 am
Why our PM showed past 44 years of Singapore history in a slide show during 2009 National Day Rally ? Is it to compare the differences and thus the improvement that we have made ? Likewise, if we were to see whether we have improved in term of life quality, we have to compare with past. Does MBT talked sense ??????
anonymous on Fri, 2nd Oct 2009 9:59 am
Also do not compare the pay package of a minister now and 20 years ago. haha!!
DavidSeeLeongKit on Fri, 2nd Oct 2009 10:06 am
SG = Screwed-up Gabra-men [not Singapore Government]
BUG = Bloody Useless Government [not H1N1 flu bug]
MSG = Money-Sucking Government [not MonoSodium Glutamate]
PAP = Pay And Pay
PUB = Pay Until Bankrupt
HDB = High Debt Bankrupt
[ bloody hell, HDB new/resale flat prices so bloody costly, no thanks to that bloody shorty $2m Minister Mah Bow Tan! ]
MBT = Minister who Bullshit in Tampines ward
[ from Minister Mah's "half-truth" statement in Parliament that HDB new flats are "heavily subsidised with a market subsidy" ]
TCM = Talk Cock Minister [not Traditional Chinese Medicine]
anon on Fri, 2nd Oct 2009 10:07 am
I think the price of HDB flats should not be too high or going higher esp in a recession. Here’s the link
High cost of HDB -> Higher cost of living -> Higher salary demand -> Higher cost of doing business -> Companies move overseas -> Job losses -> Lower cost of HDB(not happening??)
BTW If we reduce the cost of HDB we can solve alot of problems Singapore is facing now.
example..
Higher cost of living -> No time for family -> Low fertility rate
Higher cost of living -> no retirement funds
Does our government see this link?
BTW for HDB’s lease buyback scheme, who is footing the bill?
Change is upon us on Fri, 2nd Oct 2009 11:05 am
I think it is not meaningful to reason with our highly paid ministers. They only take orders from above.
Home seekers who want reasonable prices for HDB flats have to vote for CHANGE in the next elections. Home owners should also know that prices of HDB flats would also be out of range for their children.
The choice for Singaporeans is stark. Vote for CHANGE or migrate.
jolly on Fri, 2nd Oct 2009 11:12 am
i think it is high time to vote him out of the cabinet. Anyway he came into the cabinet by the back door after losing to chiam ?? Ever since that fateful day he is entrusted with the duty to make money for which ever ministry he is posted to . this is for all to see if we track his records over the past 15 years. As we singaporeans always lamented that the pm is always surrounded by a bunch of monkeys implementing policies that do not take into account of our livelihood in every sense of the word.
PMET on Fri, 2nd Oct 2009 11:17 am
Chiam liow lah. My salary is never moving in tandem with the median that is reported by the salary review committe every year.
and it is lagging behind a little more each year.
When I first started my job, I was in the above average income group. After I got married, my salary became the average group. Today, after buying a home, my salary is in the below average income group.
If he is going to use the salary as a gauge to price homes, many of us are going to be priced out of a home!
Scary siah… that means that I die die cannot sell my house now!
Wealth asset indeed! Where is the wealth when I do not see the money in my pocket?!?
What a load of rubbish! Don’t compare!
Richard Tan on Fri, 2nd Oct 2009 11:43 am
MBT “Huang Pa Tan” he not talking sense, he is talking cock.
PAP keep on blame on Singaporean complaining this complaining that. That the fact that we Singaporean facing,
Higher cost of living -> No time for family -> Low fertility rate
Higher cost of living -> no retirement funds
This are the ROOTS of the Problems. But our highly paid Government give a blind eyes to see the ROOTS of the problems, instead they bring in FT from China, India and Philipino to boost up the population rates. This FT do they have a heart for SIngapore? Don’t bullshit us again and again.
Dilemma on Fri, 2nd Oct 2009 11:49 am
Hi people you need to understand that the MAS’s policy is price stability to support exports. Thus they have to let the local money supply get inflated by the local banks in order to support neutral current exchange rate with US dollar which is being inflated by the Fed.
The other option is to let the exchange rate rise to prevent local money supply from being inflated by US dollar but this will cause exporters to lose profits and cut jobs causing unemployment.
In the first option, everyone suffers equally because savings of EVERYONE are devalued. In the second option, exporters and people holding jobs in certain sectors will lose their jobs as these exporters cut costs or shift operations overseas.
If you are the minister, which one will you choose?
Dilemma on Fri, 2nd Oct 2009 11:56 am
The second option is the correct free-market option. Jobs need to be cut in order to restructure our economy, employees retrained because demand destruction is taking place. There is no point working in a job producing something that is no longer needed by society.
In the 1st option, govt intervention in the exchange rate caused asset bubble to appear in our local property sector. In other words, money is “stolen” from all current and future purchasing power of income and savings of every holder of SGD and “given” to the property sector.
Old Guy on Fri, 2nd Oct 2009 1:06 pm
Why no meaning to compare to 20 yrs ago?
Pay didn’t increase as much as flat prices for the last 2 decades.
Of course, it’s meaningful to compare
People just want to compare ONLY the pay and HDB price increases over the last 20 years..
NOT what MBT said “If we did that, we’d be comparing many things that we did 20 years ago, do we want to go back 20 years?”
Singaporeans are NOT comparing with many things and not trying to go back 20 years ago.
MBT — What type of logic is that to argue?
Dane on Fri, 2nd Oct 2009 1:38 pm
The only sector with pay increment that far outstrips any other sector and far exceeds that 20 years ago is the Ministerial sector.
BuiTaHan on Fri, 2nd Oct 2009 2:48 pm
Our government like to compare thing based on their preference. Sometime they compare duck with chicken, the next time compare
duck with goose, duck with apple, etc!!!! That why they are alway right as they do not have a consistent comparison but choose those that is advantage of their argument. Give you an example, Ah Seng scored 40 marks for his English, Chinese and Math. Ah Beng scored 30 marks for English, 90 marks for Chinese and 80 marks for Math. Ah Kow scored 80 marks for English, 20 marks for Chinese and 80 marks for Math. Ah Lee scored 100 marks for English, 100 marks for Chinese and 30 marks for Math.
When Ah Seng parent questioned on his poor performance on English, he used Ah Beng for comparison and replied that he scored better then Ah Beng. When his parent questioned on his poor performance on Chinese, he used Ah Kow for comparison and replied that he scored better then Ah Kow.
When his parent questioned on his poor performance on Math, he used Ah Lee for comparison and replied that he scored better then Ah Kow. By choosing the right comparison, Ah Seng seem to be the best but actually he is the only one who failed all the subjects.
FedUp on Fri, 2nd Oct 2009 3:16 pm
of course, mah doesn’t want to compare prices 20 years ago. he does not want you to remember how much salary a minister got 20 years ago, among other things.
it is very clear how pap defines affordability. it is affordable so long as you can pay for a 30-year loan AND sell back to hdb to “monetize” your unit and retire in jb.
vote for pap, vote for higher property prices!
cy on Fri, 2nd Oct 2009 3:25 pm
strange logic: i thought LHL compared between singapore in the 60s vs singapore today in national rally. so basically, MBT is telling his boss, you are wrong, it is meaningless to compare with 50 years ago, so don’t be grateful for what pap has done over the years because it is simply meaningless.
cy on Fri, 2nd Oct 2009 3:31 pm
to dilemma,
using exchange rates to save exporters is 饮鸩止渴. yes, exporters get some respite in the short term but in the long run they don’t become more competitive and this will be detrimental to singapore.
However, i must stress that the adjustment of exchange rates must be gradual and not sharp so as to allow time for companies to become more competitive. afterall, they can’t grow up in one night.
reader on Fri, 2nd Oct 2009 3:35 pm
Hi anon (10:07 am):
“BTW for HDB’s lease buyback scheme, who is footing the bill?”
From what I see, the lease buyback scheme is nowhere near being a fantastic deal.
So to answer your question, the house-owners who entered the scheme are footing their own bill. Not just that, they are footing the pay checks for all the admin and finance staff required to run the scheme. And who knows, there may even be some left over for profits.
mama on Fri, 2nd Oct 2009 4:07 pm
of course 20years ago mr. mah was a millionire today he is a multimillionire.
if u have to sell your hdb flat or leaseback to retire ,then it means simply u could not afford it in the first place. Using 30% benchmark is not universal , there a lot of other factors involved. So stop bullshiting and start thinking of solution.
Bring down other cost of living then you can use 30% as guide.But then again HDB also say u lease from them and u never own them in the first place.
cat on Fri, 2nd Oct 2009 5:12 pm
if you include the cov payment, it definitely exceed 30%.
He ignores that out of convenience.
Where does he thinks the monies for cov come from?
cat on Fri, 2nd Oct 2009 5:13 pm
//reader
yeah not a good deal for the seller but a great deal for the buyer.
frontman on Fri, 2nd Oct 2009 5:45 pm
Well Mr Mah, I’ll just get my freinds, relatives and colleagues to vote you out.
We do not need representatives who does not listen.
Frustrated on Fri, 2nd Oct 2009 8:58 pm
Yes, I agree with frontman on that, let’s get our friends, relatives and everyone we know to vote MBT out!
kknd on Sat, 3rd Oct 2009 1:23 am
In Singapore, you do not own any property you ‘bought’.
The correct word is ‘lease’.
It doesn’t matter whether if it is HDB, condo, landed, 99-years, freehold etc.
If you don’t own the LAND, you don’t own anything built on it. Don’t forget the Land Acquisition Act.
If you want to invest in property, there are better deals outside Singapore.
Tan on Sat, 3rd Oct 2009 5:16 pm
The problem is… you can complain all you want but come election time, they’ll still sweep into power with a % that allows them to claim that majority Singaporeans voted for them thereby their policies because the whole election is a farce to begin with and those who are talented enough to stand up to them (yet not brainwashed) have given up because all credible opposition candidates are crushed.
PAP have cornered themselves in a way. Without people daring to to offer a different view. Top management will only hear what fawning underlings feed them. US subprime happened this way. Greed, $$$ and anyone with dissenting views are forced out. Give it another 5-10 years, SG will tank like subprime mortgages.
Putting things in perspective and from a holistic point of view, it isn’t so much about going against PAP or the government or any one single minister. It’s been proven that when majority of people making decisions come from similar backgrounds and offer similar views (without any chance of offering different opinions without repercussion) that they’ll more often than not, fail to see some potential disaster staring at them in their faces.
Grim Reaver on Sun, 4th Oct 2009 1:08 am
When i think of another item that has its price jacked up at an insanely high rate….
is Cigarettes….
Speaking of change, I read in HWZ, 1 guy said that even if opp won by 52% during GE, it does not measn a change of ruling party. He mentioned that after taking into account GRC, walk overs etc…. opp need to win GE by like 75-80% to see a ruling party change. Is it true? Not sure how it works.
Citiizen on Thu, 8th Oct 2009 3:32 pm
If we don’t compare prices from the past, then compare from where?the future?We need a basis and the past transacted prioes is a guage.
AwakenSg on Thu, 8th Oct 2009 4:55 pm
This bullshit which MBT talked about is really senseless and proved that he failed maths.
Somewhere in certain article shown a new graduate pay of $1600 and a 3 room HDB flat in Bt Merah cost at $30k in 1980 but it cost $300k now and a starting new graduate pay is only $3000 at best.
Same house has increased 10 times and pay is only 2 times
He gotto be trying to prove our education system failed or else proving all Singaporeans are stupid enough to believe such a crap on the pricing.
Liang on Mon, 12th Oct 2009 5:35 pm
The only way is to Vote MBT OUT..
COV on Mon, 12th Oct 2009 6:02 pm
i read in ST about an article on the purchasing power of Singaporeans. We are the 2nd most expensive country in Asia/Australia and our pay in somewhere in the 5th or 6th position in this region. In terms of purchasing power we rank behind our compatriots in Japan (Tokyo), Taiwan (Taipei), HK, Korea (Seoul), Australia (Sydney) and even Malaysia (KL). And when interviewed, your colleague said the statistics are not relevant, we should be asking ourselves if singaporeans are better today than we were yesterday. Sure we are better off than we were 20 yrs back but is it really meaningful to make such comparison?