Expensive public housing is a pain in the ass indeed.
The housing problem was made much worse by the incoming hot money from the foreign printing presses. Ours are not so bad, China, Australia and Hong Kong are over heating to the point of craziness. The common people are not talking about buying properties but renting them instead. This is inflation playing itself out plus property speculation.
So why do prices go up, and have to go up?
This one you have to go back to the basics of Keynesian economy policy implementation. You need a slight inflation to keep the game of fiat currency going. This is a game we all play. Due to the effects of inflation, the price of everything goes up.
The game is over when prices actually goes down, which is a situation that Japan has been facing for the last few decades. Let's use the scenario that prices actually falls for new flat. What will happen?
Older flats losses value as a new flat is cheaper, effectively wipe out billions in value meant for retirement for ALL home owners.
People will perceive that buying a flat is a negative asset, it depreciates over time and losses value. So the only way is NOT to buy a flat but to rent housing instead.
This also creates a downward spiral momentum on public housing prices. Why do current home owners want to hold on to their loss making flats when they should go and buy a cheaper and newer flat? This will cause the depreciation in value to accelerate, creating the first made in Singapore housing crisis.
The problem is more like the prices are increasing too rapidly, and COV is something that needs to be tame. If there is a party that saw this, and have a practical solution to it, I am all ears. Unfortunately, as I kept humming, the opposition didn't understand economics, have a poor grip on reality and in turn have terrible short sighted populist policies. The impact is very serious. People are going to lose jobs, life savings, and worse yet, in the current global economy climate, this is a mistake we cannot afford to make.
Personal background
I am a IT engineer, whose field is flooded with foreigners. We are out numbered 1 : 20 or maybe more.
In my department, the number of PRs, new citizens and EP holders completely out numbered born-in-Singapore Singaporeans. Does that mean I should go around bashing foreigners for jacking up prices in resale flat, taking up space in MRT or stealing your potential life partner? No. As I said, these are the new Citizen in the making, well over the majority settled down here. Singapore is a country made up of foreigners workers and immigrant.
I got a colleague who was also cursing and swearing at PAP all the time for years. Then this week, he announced happily that he is going to marry a PRC, going to sell his flat to a new citizen making a handsome sum in the progress. I was like WTF, people changed over night.
Again to talk about opposition policies, many of them are not new, and have known undesirable effects too. There is little information on how to handle the various issues that are bound to happen if the policies are implemented. This is akin to sell first worry later, very irresponsible. It's like the iPhone 4 with the antenna problem.
FT
More foreigners keeps the game running. Someone else's loss is another's gain. Look the other way, does losing 1.5 million FT solve the problem? It will only create a new set of problem, probably more undesirable in the long run.
A loss in advantage over our neighbours will send us downwards relatively. Once pass the tipping point where the upward momentum in price, deflation and stagflation will kick in and that is something we cannot afford. The effects comes in only after many years.
Take a look at my favorite beating dummy, the US, the land of the free. Not that we will be like them if we vote for the opposition but this is what bad policies can do. After 911, they had tighten immigration policies, kept the same policies that the opposition are selling and where are they now?
http://www.shadowstats.com/
1) A housing bubble that had not completely deflated since 2008
2) Real unemployment over 20%
3) Real inflation well over 6%
4) Obama care remained unfunded, a promise that cannot be kept
5) FT brain drain crippled their knowledge industries
6) Heavy taxes drove out their rich and large companies
7) SME were wiped out
8) Food stamps use had grew to ...
http://www.dailyjobsupdate.com/wp-content/uploads/Food-Stamps-Nations.jpg
9) US dollar had plunged to toilet paper status.
http://www.fxstreet.com/rates-charts/usdollar-index/
After reading wider and gaining a big picture view, I had arrived to the conclusion that we should always vote for the best policies for our country. There is no way to teach economics or fiscal responsibility over a short time. I didn't like to take things at face value, I do my own research.
In time, you will understand drawing 60 billion for the reasons raised by SDP is unsustainable and likely to be wasted.
PAP will make a bunch of very bad salesmen complete with equally bad PR skills despite their merits. They are not selling their achievements, current projects or their future plans.
Turn the question around and ask the opposition, not the achievement or projects but just the future plans. I find that their populist policies could not met my expectations.
I don't see a future with them at their current state. I am not pro-PAP but the opposition need to have more substance over form. It is very easy to attack one and the burden of proving innocence lies with the victim. Also everyone can complain with 20/20 hindsight.
Did the opposition demonstrate an understanding of global challenges and how we should tackle them? Or go back in history and understand how we had arrived with the current policies? Or study the impact of the very policies that they are selling?
Out on the streets and internet, PAP looks like a piece of crap, as painted by the opposition. Somehow, I didn't see people starving, loses a job, got no place to stay, flats collapsing, stop buying their next car, go for the Xth holiday for the year, get a new pet, going for fine dining, buy a new designer bag, drop out of school because school fees are too high and so on and so forth.
4 comments:
There will always be people who suffer from policy changes. Yes resale flat prices will follow if new flat prices drop, and those who need to sell their homes in the interim would be stuck.
However, since each Singaporean can only buy a new flat twice, there would still be demand for resale flats. Would that still result in the deflation scenario that you have painted?
The argument for low cost new flats is that it is meant for residential purposes, not investment. What sort of "value meant for retirement" being wiped out are you referring to, when the flat can't be liquidated without giving up a place to stay?
Assuming there are no changes to this asset enhancement policy and prices continue to rise. Would you continue to pay high price for a flat with 10 years left on the lease? In your argument, how would that affect home owners' retirement savings?
I can't think of a way to tame COV without intervening with the market. I'm interested to hear your ideas.
May I know what statistics you are quoting from to say that "well over the majority [of foreigners] settled down here" instead of going home?
No opposition party talked about removing the existing foreign workers.
I don't know why you are bringing up the USA as an example of bad policies. Like I mentioned in my opening, any policy will be disadvantageous to a particular segment of the population. Conversely, I would be interested to hear your views on which country has good policies.
"I had arrived to the conclusion that we should always vote for the best policies for our country." I support this statement. I just feel that what is best for you might not be the best for others.
And this is illustrated in your last paragraph, "I didn't see people starving, loses a job, got no place to stay..." The plight of the underclass is invisibilised, which is why it's natural for you not to see it. It's impossible to hear it as well, if there's no voice to speak up for them in parliament.
Without a doubt, this group of people that I speak of is a minority. The other problems you've listed about cars, holidays and fine dining don't apply to them. But when we decide on our "best policies", I wonder if we spared a thought for them.
First of all, thanks for taking your time to leave your valuable comments. Let walk through your comments and discuss the topic.
There will always be people who suffer from policy changes
Personally, I would like to go for a 80/20 rule. You can't please everyone.
However, since each Singaporean can only buy a new flat twice, there would still be demand for resale flats. Would that still result in the deflation scenario that you have painted?
I am assuming a few things here, so bear with me, so lets paint a scenario. Let's say things go like this.
1) New 3-room flat goes for $250,000 while a resale fetches $300,000.
2) Existing house owner is now unable to resell for $300,000 and has to take a haircut of $50,000 each just to match the new price on resale. Unless the location is good, house value must fall due to the effects of basic principles of supply and demand. As a new home owner, you will not buy a resale flat but a new one unless the price can justify the location.
3) Multiple the amount of money lost per flat with all the flat owners and it will be a handsome amount indeed. Will a flat owner vote for a deduction in their home value? I doubt it.
4) The prices of rental will have to fall as well as the underlying asset prices had fallen. There are many home owners renting a room out for some money. This will also impact the existing home owners negatively.
5) Let's say even if the resale flat price does not change, but the new ones did. The gap between the old and new will be widen, making it less possible for existing home owners to upgrade later as their current flat sell for less.
6) The new flat owners will eventually become the old flat owners. This cycle will continue.
Net effect will likely be that existing home owners will be less able to sell their flat at the previous price, and afford a upgrade later.
The argument for low cost new flats is that it is meant for residential purposes, not investment. What sort of "value meant for retirement" being wiped out are you referring to, when the flat can't be liquidated without giving up a place to stay?
Assuming there are no changes to this asset enhancement policy and prices continue to rise. Would you continue to pay high price for a flat with 10 years left on the lease? In your argument, how would that affect home owners' retirement savings?
Value from existing flats can be extracted mainly through 2 things, downgrading and rental income.
If your existing home value was reduced instead of grown as expected, downgrading will yield less extra cash and renting out a room or 2 for extra cash will yield less than before.
What people do not understand is the devil call inflation. You need a little of it but not too much. The prices of things must increase gradually but not massively. No one will buy something that will devalue in the future as an investment.
If the value of your asset depreciates over time, will there be a reason to own your own flat? You might as well rent a room.
I can't think of a way to tame COV without intervening with the market. I'm interested to hear your ideas.
Unfortunately, I don't. I was looking for inputs on this one too.
May I know what statistics you are quoting from to say that "well over the majority [of foreigners] settled down here" instead of going home?
I mentioned in my article that the FTs that I know by name in schools, at work, with the exception of one, stayed as PRs and later converted as citizens. My facebook page is full of them, so I will say that the statistics came from my own observations. This of course might not reflect your personal environment but you might want to look around you.
No opposition party talked about removing the existing foreign workers.
Not saying they did, but they did mentioned about the overcrowding problems they came with. The scenario can never occur, but just painting one to see what might happen.
I don't know why you are bringing up the USA as an example of bad policies. Like I mentioned in my opening, any policy will be disadvantageous to a particular segment of the population. Conversely, I would be interested to hear your views on which country has good policies.
For the majority of the Gen-Y who were raised in the environment when the popular media paint the US is good guy, powerful, rich and always correct (along with their policies), it is hard to see through their policies both internal and external. Many their policies have many disastrous consequences as they are often short sighted and sometimes, plain dangerous. For a reference, do look at http://www.shadowstats.com/ for numbers you might be interested in.
They have many policies in place which are similar to the ones offered by the opposition which is simply unsustainable and as dangerous. Each of them is a long topic itself.
Eg. minimum wages, housing policy, fiscal policies, 401k, pension scheme
"I had arrived to the conclusion that we should always vote for the best policies for our country." I support this statement. I just feel that what is best for you might not be the best for others.
Again, I must stress, nobody can please everyone. I will love to vote for a party which can bring sound alternatives, and by no mean, I will always vote for the lightning party. Hence if a party comes with sound policies, heck it, why not?
The problem is what I kept stressing, many of the opposition parties are offering policies which on the surface nice and good but will lead us to the paths of Greece and the USA.
Let's use housing as an example again, will you sacrifice the majority existing house owners for the minority new buyers? Will they allow their money locked in HDB flats be reduced overnight? Can the amount "saved" by the new owners be justified with the amount "lost" by the existing home owners?
And this is illustrated in your last paragraph, "I didn't see people starving, loses a job, got no place to stay..." The plight of the underclass is invisibilised, which is why it's natural for you not to see it. It's impossible to hear it as well, if there's no voice to speak up for them in parliament.
I don't know how you define the underclass but I have seen what is really poor in the countries around us. Families living with $5 US$ a day, having to sell their daughter into prostitution for food? Or families who could afford to send even their only child to school? Children crippled intentionally so they can beg on the streets better?
Relatively, we are quite well off but of course we can always improve things in our own country. I do agree that representation will be good.
In that case, I will like to go for the teach a man to fish method instead of going into a welfare state mode.
Without a doubt, this group of people that I speak of is a minority. The other problems you've listed about cars, holidays and fine dining don't apply to them. But when we decide on our "best policies", I wonder if we spared a thought for them.
No doubt. And I will agree with you. As a chinese, my belief is education is the key to escape poverty.
You can try to do a google search on "greece social welfare crisis" for an idea how excessive populist programmes will eventually lead to the fall of a nation.
You can also substitute Greece with the other PIIGS countries and the USA.
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