Desmond Lee, whom I excoriated in my last post for claiming that the minority residents of West Coast GRC were well served by the remaining majority race MPs after Iswaran was convicted and ignominiously despatched to jail, is in the state media again this week. In a tame interview with the PAP’s media monopoly, he boasted about the Government’s efforts to reduce the (artificially created) housing shortage and build more BTO flats. He said that 19,600 units would launch this year with 3,800 units with a waiting time of under 3 years.

However since the population increase has accelerated to 2% p.a. over the last year and the rate of increase has been moving higher over the last ten years, the announced BTO flats are barely keeping pace with population growth. Singaporeans are also entitled to ask why there is such a long lead time on the construction of new flats when HDB should be able to build them much faster. Looking at HDB’s own statistics, the building of new housing has slowed right down just when population growth accelerated.

As I have stated repeatedly for many years in my blog, the Government has little interest in providing low cost housing for Singaporeans since a rising value for land leads to a rise in the theoretical value of the reserves. Everyone knows that the Government owns 80-90% of the land in Singapore. HDB is one of the main means by which the Government monetises the rise in the value of the land and transfers this to the reserves where it is locked up and unavailable for spending, in theory till there is a rainy day but in practice forever. HDB buys land from Government through the Singapore Land Authority and the Government provides a grant, currently $5-6 billion a year, to HDB through the annual Budget to allow HDB to afford the purchase.The Government claims that these subsidies as well as grants to first time buyers, again financed through the Budget, keep housing affordable but Singaporeans should ask why it doesn’t just reduce the price of the land in the first place. The real reason for this convoluted way of doing things is to take money out of the Budget that could be used for current spending on increasing Singaporeans’ welfare and stealthily transfer it to the reserves. Meanwhile, while the reserves are supposedly being kept for a rainy day, it’s already pouring for many Singaporeans, particularly the elderly who are forced to work till the day they die because of inadequate savings and the Government’s refusal to provide even a minimum safety net. The Government calls investing in Singaporeans, or just returning the money they collect from them, populism.

The Government insists that the value of the land sold to HDB is determined by the Chiel Valuer who takes into account the value of the land in other uses and sets a discount and that it has nothing to do with the process. However the. Government controls both the supply of land and the number of units HDB builds, which is still far too low, as well as population growth through immigration, both citizens and PRs as well as the non resident population, and thus one of the main drivers of demand. As any A level student of economics knows, a monopolist who enjoys a relatively inelastic demand for its products can pretty much set prices wherever it wants.

However the cruellest trick played by the PAP on Singaporeans has yet to play out. The greatest transfer of wealth in Singapore’s history will play out when the 99 year HDB leases start to expire and Singaporeans’ homes revert to the Government. There’s no doubt that HDB blocks, if properly maintained, could last longer than 99 years but the main value lies in the land not the building. It’s not only a wealth transfer to the Government but a transfer from previous generations of Singaporeans to new citizens and immigrants who do not have their savings tied up in now valueless leases. In the past PAP Ministers, including Lee Kuan Yew and LHL, used to boast that HDB was an ever appreciating asset that would never go down in price but of course the PAP are now silent on that score. Unfortunately many Singaporeans were gulled into assuming that the Government would extend their leases for nothing or at least on reasonable terms. In any case they had no choice but to buy HDB given its monopoly over affordable housing.

How much longer will Singaporeans allow themselves to taken in by a Government that claims to be interested in their welfare but whose members are so clearly much more focused on increasing the value of their own property investments in GCBs, which of course are freehold, allowing them to build up the kind of generational wealth from property that ordinary Singaporeans are continually lectured would be wrong for them? Shanmugam’s spectacular sale of his GCB for $88 million, which he bought 20 years ago for $8 million is only one example and I’m sure would be dwarfed by other Ministers’ gains which would be revealed were they required to publish their assets.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam