A letter from Ng Kok Lim: Home ownership becoming a liability rather than an asset
September 22nd, 2009 | 
Author: [EDITORS' NOTE: This letter was submitted to us by Mr Ng Kok Lim who had two letters published earlier by the Straits Times Forum on rising prices of HDB flats. Please feel free to send us your letters at [email protected]]
I refer to the letter “People should be free to decide what a flat is worth: HDB” to the Straits Times dated 14th Sept 2009. (read letter http://singaporeenquirer.sg/?p=4619)
HDB claims to be responsible for sustaining flat prices over the long term. Looking at resale flat prices from 1990 to the present, sustenance of flat prices hardly needs worrying about as increases in flat prices have far outstripped increases in peoples’ incomes. Conversely, shouldn’t it be HDB’s responsibility instead to ensure that increases in flat prices do not outstrip the people’s capactity to pay for them?
The title of the letter itself suggests a misconception surrounding the myth of “willing buyer, willing seller” so often perpetuated by the HDB.
The fact that HDB is claiming to be responsible for sustaining flat prices means that it has the means to influence the overall price level of HDB flats. That is the crux of the issue.
While people are free to decide how much to price their flats, their decision cannot deviate significantly from market conditions that are largely controlled by the HDB itself, through such mechanisms as controlling the amount of land that it releases to the public and the number of new flats that it builds.
Ask ourselves, how can we sell our flats at a premium when the govt is building one exactly the same right next door to be sold at cost? It is because the govt isn’t building them or isn’t pricing them at cost or is choosing to release the land for private condominimums for example that resellers are able to command the premium that they are getting.
The situation is not unlike the case of a sole importer monopolising the rice trade. If he opens up all his warehouses and distributes the rice to all the shop keepers, there will be plenty of rice for everyone and no one will have to pay a premium for rice. But the moment the importer restricts his supply of rice such that supply barely meets demand, people will start to fight over rice and the shop keepers will now be able to command a high price for rice.
That is exactly what is happening to our HDB resale market. By not supplying enough new flats, the HDB creates the conditions for the resale market to heat up.
The HDB claims that the total number of bookings for HDB flats with grants amounts to 13,000 to 15,000 units each year, which far exceeds the 8,000 new flats HDB is building this year. So isn’t this clear evidence that the HDB is not building enough new flats to satisfy demand?
The HDB claims to have enabled 80% of the population to own their own homes. But going by the exhorbitant price people have to pay for house ownership, house ownership becomes a terrible liability rather than a proud asset that the people can be proud of.
Ng Kok Lim
Other letters by Mr Ng Kok Lim published in the Straits Times Forum:
>> Do criteria reflects reality? (5 September 2009)
>> Affordability of homes (26 September 2009)
Posted in 
I refer to NG KOK LIM aricle on “HDB ownership become a liability than as asset”,
If u have read Robert Kiyosaki books or listen to his seminar, u will know his view that he view property as a liability instead of an asset. This is because a home property does not generate cashflow.
Why don’t u rent a flat or condo to stay and not buy a home property? Should we beg the local property companies such as capitland. city dev. keppel land , far east, lc dev, allgreen. hong fok, heeton to build condo homes so that the prices are lower so that we can buy for them? I name so many property companies to show that there is competition in the property sector.
Nobody can force u to buy a property except maybe your spouse.
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when the gov doesn’t listen to the people
the people will choose another gov that listens
simple logic
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Conundrum for the PAP? High asset prices hopefully translate into more votes for the party, while high cost (liability) translates into more protest votes? Is it really an asset if selling it means one has to shift to a similarly high-priced units?
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lee ser guan, most respectfully, I believe your post hid some very intelligent economic lies on “competition”. Let me share with you another angle economic history – the US automative industry. Chrysler was the weakest and GM was the strongest and Ford in between in the 1960s to the 1980s at least.
You may recall Chrysler was rescued by US Government in 1979 before its 2009 bankruptcy chapter 11 filing – the weakest. GM was in favour of this bailout of its distant competitor? Why???
Very simple, for nearly equivalent model of “value” to consumer, if it costs Chrysler US5,000 to build and GM for its bigger overhead spread of size economies may costs only $2,000 to build – assuming. For Chrylser to survive, it sells at US$7,000 per unit. Gm followed the same selling at US$7,000. In other words, the inefficient manufacturer set the HIGHER price umbrella of US$7,000, GM makes a greater profit. GM could priced its car for US$4900 per unit and still profitable, Chrysler would have been destroyed to no avail. So why NOT let Chrysler live and we at GM make even more money. Chrysler’s market share is too SMALL to have any negative scale effect BUT USING CHRYLER AS THE PRICE UMBRELLA WE AT GM ENJOY MASSIVE POSITIVE SCALE EFFECT of piricing close to Chrylser.
The moral of the story is – let your weakest competitor/s survived and we priced higher EVEN THOUGH THERE IS COMPETITION.
In the local context, when HDB supply 80% of the housing needs and priced it way above its costs ( given that one post say it lost money because it pay too much to Singapore Land Authority for land which the latter acquired for the price of 1970s valuation), the private sector competition like what you mentioned above local property companies such as capitland. city dev. keppel land , far east, lc dev, allgreen. hong fok, heeton etc etc DID NOT MATTER.
These private developer just priced higher than HDB and MAKE HUGE PROFITS AS THEY HAVE DONE FOR DECADES. Competition within this group is just like GM competiting with foreign car imports into the US – they all made huge profits in the early 1970s and 1980s. They are in deep trouble now because of inefficient management. The Japanese and Korean car manufacturers still make fat profits there as I understand.
So your argument is invalid in this case.
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<<The HDB claims to have enabled 80% of the population to own their own homes. But going by the exhorbitant price people have to pay for house ownership, house ownership becomes a terrible liability rather than a proud asset that the people can be proud of.
Ng Kok Lim<<
I am sick and tired of people still having this stupid misconception after 4 decades. THERE IS NO HOME OWNERSHIP, EVERYONE IS A FRIGGING TENANT. CHECK YOUR HDB LEASE AGREEMENT.
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HDB is obviously using the “willing buyer & willing seller” to disguise & minimise the fact to layman that the public housing is acutally monopoly whose motive is to maximize profit.
For your info, there are willing buyers and willing sellers in a monopolistic market. Willing buyer and willing seller does not mean a free market. HDB, nice try in obfuscation but try again and harder.
From wiki: In economics, a monopoly (from Greek monos / μονος alone or single + polein / πωλειν, to sell) exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods.
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Dear Lee ser guan (10:17am):
I read Robert Kiyosaki’s books too, and I feel you may have misunderstood him slightly.
Kiyosaki’s point is that if you are buying a house to stay in, you are basically consuming it as a consumer good. Thus like all other consumer goods, you need to buy one that is affordable and easily within your means. A house only switches from a consumer good into an asset the day you sell it off.
An alternative scenario will be if you are buying houses for investment, and will be renting them out. The rental income means there is cash inflow, and thus houses can be seen as assets right away. The implication is that a booming housing market benefits the rich people who can afford to buy multiple houses for investment, and these rich people have a vested interest in keeping the boom going.
Nowhere to my knowledge did Kiyosaki suggest we only rent instead of buy houses, “because they are liabilities”. Renting a house is silly, because you are paying others for your housing. In contrast, buying a house and paying off the installments means you are essentially paying yourself. The caveat, of course, is that you will only get the money back when you sell the house.
No decent expert will advise you to rent instead of buy. I can only think of 3 situations when it makes more sense to rent.
1. You simply have no money to buy a house and can only afford the cheaper option of renting.
2. You only intend to live in the city for a few years and do not intend to make a long term commitment (investment).
3. Your finances are tight now, but you can confidently predict it will get better in the near future, and you will switch to buying a flat only when that time comes.
It is interesting that you claim there is competition in the property market and go on to name several condo developers. Perhaps what you mean to say is that there is competition in the PRIVATE PROPERTY market.
Public housing and private property are 2 different markets and a majority of Singaporeans can only afford public housing. And there is NO competition in this market. Singaporeans are begging HDB to price their flats more affordably, but does HDB care?
Lastly, I would like to end with saying that nobody can force you to buy a property except maybe THE BASIC NEED TO FIND A ROOF OVER ONE’S HEAD!
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i think the gov is caught in between if it become a real free market. If the prices crash…everyone will suffer, if the prices skyrockets..then we’ll all be doomed too.
They can’t get themselves out of this fix.. that soon.. I don’t think any future gov.. ( EVEN IF its not PAP…) can actually fix this.
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the whole renting is better thing has been misunderstood.
the practice comes from western countries.
young people still buy a property, but they do not live in it. they rent it out while renting a cheaper place to stay in themselves.
they save money by getting a really cheap place and also claim negative gearing benefits as a tax deduction.
not applicable since there is no negative gearing here.
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i think the gov is caught in between if it become a real free market. If the prices crash…everyone will suffer, if the prices skyrockets..then we’ll all be doomed too.
They can’t get themselves out of this fix.. that soon.. I don’t think any future gov.. ( EVEN IF its not PAP…) can actually fix this.
OH! You’re my new favorite blogger fyi
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Will we be held ransom by the government at the next election to vote for the incumbent if they promise to build more flats in the constituencies contested thus reducing the prices of flats?
No votes, no flats.
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Meaning of Asset from Wiki.
In business and accounting, assets are economic resources owned by business or company. Anything tangible or intangible that one possesses, usually considered as applicable to the payment of one’s debts is considered an asset. Simplistically stated, assets are things of value that can be readily converted into cash (although cash itself is also considered an asset).
Meaning of liability for Wiki.
All type of borrowing from persons or banks for improving a business or person income which is payable during short or long time.
They embody a duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services or other yielding of economic benefits, at a specified or determinable date, on occurrence of a specified event, or on demand;
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case 1 For most singaporeans who have bought a flat and not sold it, the flat becomes a form of liability as we exchange a roof over our heads with a loan which lasts for over 30 years.
Case 2 For those who have sold the flats at least once and afford to pay for the next flat without taking up additional loans, the flat would become an asset of some sort.
Hence, if you belongs to case 1, the flat is a liability cos you still need to pay for loans.
If you belongs to case 2 the flat becomes an asset as you do not need to pay for loans.
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oh? on Tue, 22nd Sep 2009 6:24 pm’s your insight is good.
For those who are servicing the loans, if the market crash, they will blame the government for the high prices which was generated.
For those who have not buy flats, the high cost is very bad as you dunno when the market will crash.
Hence both ways the government would suffer.
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