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Archive for September 9th, 2018

Why HDB flats cannot be considered an asset which can generate wealth

Posted by temasektimes on September 9, 2018

Most Singaporeans have the ingrained mindset of properties being a worthwhile investment asset whose value will appreciate over time. As such, many are willing to work long hours and scrimp and save to purchase a property.

For the eighty per cent of Singaporeans living in HDB flats, the flats are not only a roof over their heads, but their single largest investment in life. The prices of HDB flats have nearly doubled in the past decade, but does their rising prices really generate wealth for Singaporeans?

For real estate to generate real wealth which can be unlocked by the owners, three conditions must be present:

  1. The property should preferably be of a freehold or 999 year status whose value is almost guaranteed to appreciate over time. (Leasehold private properties and HDB flats in certain locations can also appreciate in price, but only up to a certain point which I will elaborate later in another article)
  2. The bank accepts the property as a collateral and owners can refinance a bank loan to get a home equity loan as its value rises and cash out the available equity.
  3. You own more than one property so that besides the one you reside in, you have other properties to generate a steady stream of rental income and capital gain.

Singapore was still a developing economy in the 1970s and 1980s. As our economy grew by double digits, the prices of HDB flats soared as well. That is why many Singaporeans who bought their flats thirty to forty years ago will definitely make a healthy profit if they sell them today. The problem is: after selling their flats, in today’s market, they probably have to spend most of the profits from the sale to buy another place to stay.

A study done by two NUS economists, Tilak Abeysinghe and Gu Jiaying, shows that “past episodes of house price escalations have led to a substantial erosion of housing affordability” especially in the private sector. (source: NUS SCAPE) Higher property prices does not necessarily translates into higher wealth for Singaporeans.

Abeysinghe and Choy in their book – “The Singapore Economy: An econometric perspective (2007)” have examined the wealth effect of property prices on consumption in Singapore and found that the wealth effect is very much absent.

In the absence of cheaper suburbs which offer quality living, the only way for Singaporeans to unlock property values is, apart from emigrating, to downgrade to smaller units. This does not seem to be occurring on a large scale which explains why the ‘housing wealth effect’ on consumption is insignificantly small.

Higher property prices, instead of creating a wealth effect, exert a significant and negative “price effect” on consumption expenditures leading to a fall in the average propensity to consume.


Photo by chuttersnap


As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans.

Due to the limited avenues for liquidating property assets, households have to build up sufficient financial assets to smooth the profiles of their lifetime consumption of non-housing goods and services leading to a diminishing in domestic purchasing power.

Read rest of article here.


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Bishan GP Dr Yik Keng Yeong wants Sedition Act to be used on activists who met Dr Mahathir Mohamad

Posted by temasektimes on September 9, 2018

Days after being slammed by netizens for his letter on Singapore’s bloated cabinet costing only “$10 per Singaporean a year”, prominent PAP supporter Dr Yik Keng Yeong, a General Practitioner working at “Tan&Yik Clinic and Surgery” at Bishan has written another letter to the Straits Times Forum this time lambasting the group of five Singaporeans who enraged the Singapore government by meeting with Dr Mahathir Mohamad last week.

Dr Yik alluded to the Singapore’s draconian Sedition Act and insinuated that it can be used on the activists:

“The Singapore Sedition Act is a statute that clearly prohibits seditious acts and speech, and the printing, publishing, distribution, reproduction and importation of seditious publications. Mr Wham’s intention in meeting with Tun Dr Mahathir is irrelevant, quest for improvement in our country’s democratic processes or applying political pressure on our Government notwithstanding. The Sedition Act is not partial to intention.”

Despite the 5 activists’ rigorous rejection of the wild and baseless accusations that they are “colluding” with a foreign power to interfere in Singapore’s politics, Dr Yik is not convinced:

“Collusion with a foreign power in order to bring down any government is an anathema in all jurisdictions. Just look at the intense scrutiny that Special Counsel Robert Mueller is applying to the 2016 United States election, where collusion is suspected.”


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