Wednesday, 3 March 2010

Enslaving a person for life


I like this article, "Enslaving a person for life", written by Mr Tan Kin Lian in his Blog. It explains simply but clearly to a layman the risks and implication of joining the fray in speculation of HDB re-sale flats. I strongly believe that a national housing policy to ensure affordable housing for the vast majority of Singaporeans should not be captialised by any party (Singapore citizens, PR, etc.) for speculation, even if it was first implemented to support "asset enhancement" objectives.

Some argues that prices of HDB flats are solely influenced by the HDB because it is a monopoly and controls "supply" totally. If so, the HDB has a greater onus to ensure both new and resale HDB flats are still affordable.

In my opinion, there are other important factors determining whether HDB flats are affordable and sustainable. The HDB perhaps would like "supply" to be the only factor influencing prices, so that they could push out BTO flats at high "premium" prices since they are many times over-booked.

This leads us to question the meaning of "Sustainability"! I do not think the current high prices are generally affordable and sustainable.

(i) Even with loose immigration policy, can our population increase forever?

(ii) To sustain the high prices of HDB flats, there must be enough jobs to sustain the salary / wages of the population - true bred Singaporeans & immigrants alike (including foreign talents{FTs}).  True FTs may not even join the HDB market for re-sale flats. If they can afford it, they would rather speculate (or is it still investing?) in the private housing market.

(iii) What used to sustain the high prices of HDB and private housing here was the high CPF rates and wages; particularly the middle income group. Can CPF or wages be restored, even with enough high paying jobs being created?

With CPF ceiling for the middle income capped and the middle income wages squeezed in the last few years, and the cost of living going up forever, how could the high prices of HDB flats be sustained?

I note even in the private residential market, developers are testing the market, pricing their new launches at least one "click" above their old pricing strategy. What used to be priced at $700 p.s.f is now priced at $900 p.s.f. Will they be able to sustain this pricing in the private market, where supply is even more acute (due to location factor)? They might be likely to succeed...

But, can there be sufficient upgraders from the HDB market? If there are, the HDB resale market must still move in tandem, if purchasers are mere speculators. If not, people must be so confident like some die-hard supporters and believers of the HDB as the sole authority to influence price and saviour if the "asset bubble" should burst.

Even if say there is no speculation, can this gap of $200 p.s.f be plugged by upgraders? If not, it is hard to sustain prices. We already find HDB re-sale flats un-affordable ... how to find buyers to pluck this $200 p.s.f gap? It is still demand and not supply which determines prices.

The majority of us would want to supply at current high prices or even up the HDB re-sale market by another click of near to $200 p.s.f but who would purchase them at such high prices?

Will there be more "daft" people who are willing to buy at such high prices?

The MM thinks that we would be "daft" to vote the MND Minister out ...perhaps because he "forecasts" and expects us to expect the MND Minister to find such "daft" people to enter the market, be it the HDB resale or private residential property market ... that is if we still believe in him.

But we also need "daft" employers who would need to pay such high wages to sustain jobs / high wages here and these residential markets (HDB & Private) in turn would be sustained...if not 10 years; 20~30 years for as long as our bankers would want to lend you the money and "enslave" you. In fact, I wonder in the post MiniBond crisis era, will banks remain so aggressive in their lending policies...just take a look at how PMETs are losing jobs.

Perhaps, we may have "daft" people who are willing to gamble at our 2 casinos who are lucky enough to win enough to purchase properties here to sustain our property markets.

Could we allow those who are not "daft" but able to "wash" their "dirty" money / currencies here through our casinos, to then invest in our property markets (HDB Resale or Private) ?

I think it would be really "daft" to join the fray in speculating in the HDB resale flats, and be enslaved ... and the HDB housing policy on the other hand should not support this speculation just to hold up property prices and attempt to sustain the HDB market to protect the "asset enhancement" scheme.

What is needed is not a "fear to change" in view of "asset enhancement" but to "recognise the need for change" in HDB policies "to keep price affordable".

The following article is reproduced from Mr. Tan Kin Lian's Blog.

When a working person buys a very expensive property, he is enslaved for life. He has to work hard and long hours to earn sufficient income to meet the monthly payment over a period of 30 years - which is almost the entire working life. The worker cannot afford to be unemployed, as the monthly payment still has to be made, or the debt will mount, leading to high interest charges. Many people are highly stressed by this heavy burden and uncertainty.

There is a view that most people have bought their property earlier at lower prices, and the recent increase in price has enhanced the value of their assets. This is mostly an illusion. As they own only one property, they are not able to sell the property (to unlock its value) as they still need a place to stay. They also have to find someone to buy the property at the high price, and the next buyer will then be enslaved for life.

The people who benefit from the property bubble are the foreigners who are able to sell their property at the higher price, pocket the profits and return to their countries to buy a property at a modest price. The local Singaporeans have to carry the lifetime burden of the expensive property.

I hope that Singaporeans know the difference between a fair value and an inflated value from a property. They should not chase property prices at its inflated value, hoping to make a profit from its further inflation. The property bubble will burst and cause great financial hardship on them.

I also hope that our government leaders will take measures to bring property prices down to a reasonable multiple of the average earnings. As existing properties are over-priced, they have now to create a new market for a different type of "affordable" properties, which are not subject to the normal market forces. Let the consumers decide which market they wish to "invest" in.

Posted by Tan Kin Lian at 2:20 PM
Sunday, February 28, 2010

No comments:

Post a Comment