The paradox of Singapore’s economic growth: Housing Component
September 24th, 2009 | 
Author: By Abdul Gafoor, Social Correspondent
Another paradox of Singapore’s economic growth is undeniably the housing component. A country that achieves continual economic growth, will see the prosperity extending to the housing sector hereby improving the lives of citizens.
The higher incomes due to the economic growth will allow people to rent or buy houses easier, change from one house to another easier either through rental or purchase, maintain condition of houses across time with greater ease and be able to leave behind property for the next generation.
People will also have greater freedom in relation to housing with stronger rent laws or home ownership laws that will develop along with rising incomes. With higher incomes, people can also focus on building a home and not just finding a shelter over their head. However despite the fact incomes have increased 42 times in the last fifty years, Singaporeans have achieved none of the above with its model of economic growth.
Highest home ownership rate but at the expense of retirement savings
Very few developed countries actually have pursued to achieve higher home ownership along with economic growth.
What basically all developed countries had attempted to do during their development phase was to make housing much easier on its people as their incomes rise.
They did this through larger availability of houses for sale or rental, more flexible rental and sale laws etc. The whole idea is to allow its citizens to have a roof over their heads in a sustainable way for long term.
Developed nations pursued this beyond their pursuit of establishing a framework for comfortable retirement. Singapore on the other hand pursued the objective of achieving high home ownership which it did. However it was only able to achieve it by compromising on establishing a proper framework for retirement.
Singapore combined its full hearted pursuit for high home ownership rate along with its half hearted pursuit of retirement. The final outcome has been a country with highest home ownership rate in the world and one of the worst framework for retirement.
Through the economic growth model pursued by the government, Singaporeans have achieved in buying a house but they are unable to retire comfortably in that house.
Housing but not a home
One of the expected outcomes of economic growth is that with higher incomes, people will be able to focus on building a home and not just a head over the roof.
The higher incomes is supposed to provide the financial means to support marriage, child bearing, child rearing and other forms of family development.
The higher incomes achieved through economic growth is supposed to also provide greater time and means to establish good relations with neighbors.
As income levels rise, neighborhoods are supposed to be more harmonious as people can spend more time with one another. However none of this have been achieved in the Singapore economic growth model.
Most Singaporeans may have a house but not a home. Neighbors in the neighborhoods or even the same block or stair level are stranger than strangers. Some of the crime ridden neighborhoods still remain crime ridden over the decades.
The house itself has become nothing more than a place to retreat to to sleep after work late in the night before getting up the next day to rush to work.
Own the house but not after your lifetime
With increasing incomes, people should be able to not only own a house but be able to transfer the wealth to subsequent generations.
Part of the whole purpose of seeking higher incomes, is to allow subsequent generations start off at a higher financial level through the passing down from earlier generations. However public housing in Singapore is only 99 years and though most Singaporeans own a house, they do not after their lifetime.
Even if they are able to bequeath their house to their children, their children will not enjoy it for long as the 99 years lease will expire.
Public housing sold at private housing prices
Not many developed governments have entered the housing market to assume the role of provider of housing.
In Singapore that has been the case. In most developed countries, the governments rather let the markets decide but they fill in the gaps and also regulate the markets.
Singapore government’s decision to assume the role of provider of housing, was partly to promote affordability which it did initially. However as soon as they started to assume the objective of profit maximization which contradicts affordability, they soon started to offer public housing at private housing prices.
One may argue private housing prices in Singapore is higher. We need to compare apples to apples. Should private sector were to provide housing for Singaporeans, the price of the same types of houses as what HDB has built will cost just as much or maybe lower than what HDB prices.
Therefore even though the Singapore government has increased the size of economic pie by more than 30 times, the wealth increase in the country has not been used sufficiently to make housing cheaper. Instead the prices have gone way much higher.
Its your house but you have limited rights to it
The very concept of owning my house means it is something to which I have my natural rights.
In Singapore vast majority of Singaporeans own a house but with limited rights to it. Comparing to the generations of Singaporeans who lived in kampong houses and other private houses and who subsequently moved on to HDB houses, their home ownership rate has not changed across the generations. However their rights to their houses have decreased.
Once again the reason why all the outcomes that Singapore should have achieved in housing along with its economic growth but which it did not is simply because the politicians and policy makers’ concern for the past fifty years has been about the digit change in real GDP growth.
They have been running like silly race horses with shields on their eyes just looking at superficially upping the real GDP growth. Till today they fail to pay any attention to what outcomes such as in housing must be achieved with higher incomes and economic growth. Instead they look at those separately as if these two are unrelated.
It is about time we shift our politicians and policy makers to Kranji racecourse and start weekday daytime and night races for I am sure they will run round in circles better than race horses.
About the Author:
Abdul Gafoor is a researcher based in the United Kingdom
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wonderfully written this is dot on , all the talks about using CPF for retirement is out of place instead buyers are willing to let developers reap profits from this so call retirement system which is unigue in Singapore .Unless something is done to repair the danage , we will see our retireme
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some good points.
IMO 99 years leases are about right in land scarce Singapore. Freehold properties a much much more expensive though I would say every cent is worth it (plus the fact that free-hold condos have good resale values if the need arises).
The pricing formula for new flats which knockon onto resale flats is making the whole HDB resale and HDB sale prices foam bubbles. We should not be able to create a situation where we get a “SG version of sub-prime” but it also leaves lots of citizens (converted or natural born) with a depleted CPF account. While I always profess to effective personal wealth management via simple financial products, not a whole lot people my age are into these things. It potentially leaves a large amount of people with lots of equity locked in their flat when they age.
Do note that this is actually a issue in Australia where after paying off their mortgages Australians find themselves short in their super accounts (CPF aussie version) and the house they are sitting on has appreciated in value but its locked in equity. Banks actually have stepped in with plans to unlock this equity (which in essence means that the home owner sold their house to the bank but continues to live in it for X years).
While the HDB is at fault for their pricing strategy, I see the resale market as part of the problem. Sure we have to wait 5 years before selling a flat but people (and I mean citizens here) once used to take a new flat sell it, take a new flat sell it and then take their last new flat and sell it that too. Granted not everyone was doing it but enough people were doing it to make the government create the 5 year rule. Considering that back before the 5 year rule new flats were really cheap compared to now, the people who managed to do that 3 times stunt before the rule change made off with a large packet of cash. It was probably down to two choices, smash the resale market of HDB flats by closing it down or make rule changes to curb the speculative behavior of HDB flat buyers.
I wonder what if the government made it such that you can only sell the flat back to the HDB if you get another flat (upgrade). What would the situation be like now? This highly inflated HDB market has to be burst, we want it to burst.
Or do we?
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This is an excellent article. Well done
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Without the HDB housing, where is the visible “pillar” – even it is just seeming – of a domestic economy sustaining the construction industry and the infrastructure accompany. It gives us the appearance of a “first world city state” but without the wealth. Inflated housing = retirement money and then rubbing insult to wounds claiming 44 years of great wonder political leadership that makes this place a “wonder” of world admiration when reality is the blood sweat, tears and toiling of the abandoned and forgotten previous generation.
With the construction sector, we got a small branch of economy called private property developer and construction companies. Outside these two pillars of domestic economy, the biggest and more successful sectors – manufacturing and banking are largely FOREIGN-OWNED business. The Singapore counter-part of these “foreign economy domicile on Singapore soil” is just SME supporting and employment.
When foreigners pulls out of manufacturing and banking sector is even more competitively engaged in cyberspace age technology, WHERE IS OUR ECONOMY HEADING TO AFTER THE BUILDING OF THOSE CASINOS?
Anymore of the so-called “44 good years”? Or we have PEAKED not just of a retarded economic structure and also RETARDED OF TALENTED MIND FABRICATING A LOOK GOOD FEEL GOOD ECONOMY of no domestic substance, sustainability other than making it even more crowded (looked busy and successful of bustling economy) by dumping more and more foreigners in our midst?
We are hitting the wall and the brightest of the so-called brightest with huge paychecks HAS ACTUALLY RUN OUT OF A SUCCESSFUL MODEL OF ECONOMIC DEVELOPMENT DECADES AGO AND MSM TELLING US KIDS STORIES.
It is very SAD BUT TRUE. Singaporeans looks very busy, very wealthy, struggling to put food on the table and a life of happy retirement working to their graves at the ages of 70s to 80s.
GREAT PLACE OF NO PARALLEL IN THIS WORLD.
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[...] Blog: Straits Times editorial chides Singaporeans for being unreasonable – The Temasek Review: The paradox of Singapore’s economic growth: Housing Component – Diary of A Singaporean Mind: Straits Times Editorial: …Its all YOUR FAULT! – Hard Hitting [...]
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I am on your side of the fence on these issues but I think you shouldnt go to the extent of saying we have crime-ridden areas. Singapore, for all its shortcomings, is really safer than most countries with the well-lit streets and corrupt-free police. Note Im talking about normal, everyday crime. Not the sort that involves wearing t-shirts of marsupian prints -_-
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The two issues are not related: using of CPF retirement savings for purchase of housing which drives up housing prices; and the issue of private ownership of property (which Singapore does not have with the exception of freehold land purchased during early colonial times) which is probably against the socialist principles of the PAP.
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Gd point Gafoor — that there is a time and place for govmin to take the lead in hsing.
And a time to withdraw.
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In Taiwan Hsinchu City where Taiwan’s GDP contribution is highest, one private 3 room freehold condo unit just costs SGD350k-SGD400k. It comes with swimming pool, jacuzzi, gym, gardens and even sculptures to beautify the place. Now ..that’s life.
In Singapore, SGD350k-SGD400k can buy you an empty 99year lease public flat. No facilities.
HDB flats are very much overpriced….
http://www.thepetitionsite.com/1/lower-hdb-valuations-or-build-more-affordable-hdb-housing-for-singaporeans
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