>So the latest ruling to cool down the property bubble is that after 30 Aug 2010, you have to sell your HDB flat, if you have purchased a private property (even if that private property happens to be overseas). The principle is that in a land scarce Singapore, HDB flats are meant for citizens to enjoy affordable housing and if there are those who can afford private properties, they should not be entitled to the subsidized HDB flats.
Not that I believe that HDB flats are subsidized in the first place, but otherwise, I support the above ruling. Some may argue that retirees may want to hold onto private properties as rental income while they keep living in their HDB flats. However, if we allowed that, it would deprive of first time HDB applicants (especially young married couples) of their new flats. In a land scarce Singapore, I agree that a first home is more important than a property that gives you income.
Liberalized use of CPF for private property started chain reaction on housing prices -
That aside, how did we come to this property bubble in the first place? About 20 years ago, the PAP liberalized the use of CPF. It allowed the CPF to be used for private properties. There was a mixed reaction. Those who had high amounts in their CPF (yes, the rich and elite, if you don’t know who I mean) were excited with the new ruling.
However, the ground feedback was that if that were to happen, there would be a rush for private properties, pushing private property prices up at one go. This is because of the large amounts of “unused” CPF monies. That in turn will push up higher end HDB flats like Executive Flats. The chain reaction will be that even lower end HDB flats like 5 and 4 room flats will follow suit, due to the domino effect.
The PAP wouldn’t listen. It was seen that some years after the liberalization of CPF monies to buy private properties was allowed, the property market bubble began to form. That was around 1991 to 1997. It finally burst during the SE Asian Financial Crisis of the late 1990s.
The damage was already done. Ever since that liberalization of CPF in around the early 1990s, the HDB prices have always been so high, most new applicants would have to take up long term loans that last about 25 to 30 years – which is about nearly the whole of their working lives.
I bought my flat with my wife in the 1980s. A good thing that we married young because our friends who married later after 1990s, missed the low HDB prices of the pre-1990s ruling where you could not use CPF for private properties. We took only a ten year loan and our monthly installment to repay that loan was a ridiculous $266 a month! Yes, ridiculous by today’s standards.
That wasn’t the surprising thing. The surprise was that we bought a RESALE flat! At that time there was no $30k, $40k or what not k subsidy. And I was the one who paid the installment in full, without my wife contributing.
Needless to say, when our flat was fully paid up, we were only in our thirties!
A different story today -
Today, I worry for our children who have to face stiff HDB prices. In the early 1980s, the flats that were bought from HDB can be as low as $10k to $20k for a 4 room HDB. Today, it is many more times that.
Yes, the property boom in the 1990s helped my wife and I to upgrade our flat because we sold our 4 room flat at a ridiculous price. However, while we may have benefitted, I worry for the future generations (like our children), who will have to pay through their noses, just to have a roof over their heads.
It is not that this ridiculous housing prices for HDB flats was not foreseeable. 20 years ago, when there were warning bells sounding that if the CPF was liberalized to buy private properties, it would cause a chain reaction and push up HDB prices, the govt just would not listen.
So today, we see the govt doing yet another “patch up” work by putting a ruling that if you were to buy a private property after 30 Aug 2010, you have to sell your HDB flat. But this in turn will cause some unintended results (just like the Education policy as seen in my earlier article). These unintended effects are:
1. Bona fide retirees who intend to buy private properties (be it in Singapore or overseas) so as to earn rental income are now affected.
2. PRs who come to Singapore to work long term are now burdened to either rent a HDB flat or buy a private property. Isn’t this making it harder for PRs to come here, when it is PAP’s intention to bring them in?
As always, the PAP are patch up workers. They only patch up holes that open up more holes in other areas. They didn’t have the long term vision to see that 20 years ago, if they had listened to the warning bells, the HDB prices would not have been as high as it is today.
But bottom line is, Singaporeans’ grievance is that it is our young generation today who have to bear the brunt of high housing prices, no thanks to the usual tunnel vision of the PAP and their policy makers.
