Last year Hazel Poa of NSP caught Minister Mah fudging the numbers to show that housing was still "affordable"[Link.] I thought Minister Mah would have learnt not to do something so deceptive again. Unfortunatlely, we will have to catch Minister Mah again....this time for fudging logic...
"Minister Mah Bow Tan warned against the Workers' Party (WP) call for cheaper HDB flats on Thursday, saying it would mean larger subsidies for housing at the expense of other needs, such as healthcare, education or defence.
Calling the opposition party's manifesto 'irresponsible', he noted that the WP had not said where the extra money would come from, and pressed them to reveal the implications of their proposals." - Straits Times (see article below).
Minister Mah calls WP irresponsible for its plan to provide more affordable flats. He says that cheaper flats means more housing subsidies and less money for education and healthcare. Let me ask you a simple question. In the past few years when the price of HDB flats surge by more than 50% , by Minister Mah's logic, the govt should be awashed with more money from selling HDB flats for healthcare and education - if that is so, why did the govt implement means testing to cut subsidies for healthcare and why did they have to raise school fees for universities and cuts subsidies for education of children with special needs etc? The fact is budget has little to do with HDB selling price. If anything, when the HDB prices go up, the HDB actually shows more losses due to "market subsidies" which increase proportionately with price. Why is this so?
1. Land sales are not included in the govt revenue in the budget. This has been a long standing issue because it distorts the fiscal picture and Sylvia Lim of WP has called for the situation to be fixed[Link] so that Singaporeans can get a more accurate picture of govt expediture vs revenue.
2. A large component of HDB flat sale price is due to cost of land priced at the market.
3. HDB buys land from SLA at market price. The revenue of land sales is not included in the budget's revenue figures.
4. The HDB then includes the land cost plus other cost to price new HDB flats. It then sells it at a "market subsidised" prices to flat buyers.
When the price of flats surge up by 50%, no significant amounts of money went to subsidise healthcare and education. Similarly, if the price rise of flats is kept close to changes in median incomes as suggested by the WP amd by pricing the land sales to HDB accordingly, govt healthcare and education expediture will not be affected.
Linking public housing to median income changes is sensible because if housing price move significantly vs income, it means that Singaporeans have to take up more debt to financed their home purchases. Every where else in the world, public housing is priced for affordability and not directly linked to market prices. The high debt taken up by ordinary Singaporeans pay for expensive new HDB flats...most of the money eventually goes into our reserves i.e. GIC. The issue of risk free gains when 1st time buyers sell in the resale market can be addressed by lengthening the lockup periods for selling the flat and limiting the number of timeas a person can buy directly from the HDB. In the long run a healthy steady state should be housing market where prices are closely correlated with inome gains. When you have prices moving up 50% without the corresponding gains in income, debt piles up and a bubble forms.
Apr 14, 2011
Mah Bow Tan: WP manifesto 'irresponsible'
By Teo Wan Gek
National Development Minister Mah Bow Tan warned against the Workers' Party (WP) call for cheaper HDB flats.
NATIONAL Development Minister Mah Bow Tan warned against the Workers' Party (WP) call for cheaper HDB flats on Thursday, saying it would mean larger subsidies for housing at the expense of other needs, such as healthcare, education or defence.
Calling the opposition party's manifesto 'irresponsible', he noted that the WP had not said where the extra money would come from, and pressed them to reveal the implications of their proposals.
'You can't get something for nothing,' he said on the sidelines of the Urban Redevelopment Authority's Corporate Seminar.
The WP had unveiled its 63-page manifesto on Saturday. Called Towards A First World Parliament, it contains proposals on 15 broad areas of public policy, with a number focusing on hot-button issues like public housing and immigration.
One of the key points under public housing was to allow for cheaper HDB flats by pegging the price of the flats to the median incomes of households that qualify to buy them, instead of pegging them to resale market prices. Another was for flats to be affordable enough that mortgages can be paid off in 20 years instead of 30.
Read the full report in Friday's edition of The Straits Times. http://www.straitstimes.com/GeneralElection/News/Story/STIStory_656833.html