Written by Ng E-Jay
02 April 2013
The Housing and Development Board (HDB) said that prices for both HDB resale flats and private homes grew at a slower pace in the first quarter of the year, and that this is the lowest quarter-on-quarter growth in the resale prices of its flats since first quarter 2012.
Analysts have attributed the slowdown to various cooling measures implemented recently.
However, the Resale Price Index (RPI) flash estimates for first quarter 2013, which now stands at 205.4, has hit an all-time high. Clearly, despite the reduction in the rate of growth, prices have continued their inexorable climb.
A chart posted by TR Emeritus tells the story well:
The property cooling measures have not been effective enough. This is because the root cause of escalating home prices has not been addressed.
Property prices in Singapore are driven upwards by foreigners and PRs who have created greater and greater demand over the years. As long as we keep taking in foreigners and PRs at the current rate, demand will continue to force property prices upwards and no cooling measures will be effective in arresting the climb.
Up until recently, the prices of new HDB flats were linked to the resale market. Thus, prices of new HDB homes rose in tandem with resale flat prices, wrecking havoc on the financial lives of young couples who found themselves increasingly priced out of the market.
It was only when Mr Khaw Boon Wan took over as Minister for National Development in 2011 that this policy of linking new HDB flat prices to the resale market was reversed. But it was too little, too late. The damage had been done.
Why should public housing in Singapore be in such a sorry state? The government should be selling public housing to young couples and singles at prices pegged to the cost of construction, not at prices determined by market forces. This is especially so when government policies create overwhelming market forces that push property prices inexorably upwards, through the import of large numbers of foreigners and PRs.
Government coffers, real estate agents, construction companies and property developers have been the main beneficiaries of this property bubble. But the ordinary Singaporean family just starting out in life is faced with lengthy and expensive mortgages that will leave them with little or no savings to retire on.
This is a classic case of the politics of greed and avarice gone wrong.