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HDB flat an appreciating asset, but value will not increase as fast as S’pore’s economy matures: Khaw

SINGAPORE — Amid spirited public debate on the lease expiry of public housing flats, Coordinating Minister for Infrastructure Khaw Boon Wan stressed on Sunday (Sep 2) that Housing and Development Board (HDB) flats are an appreciating asset, although the increase would not be "as sharp as" in the past due to moderating economic growth in Singapore.

HDB flat an appreciating asset, but value will not increase as fast as S’pore’s economy matures: Khaw

(On stage, left to right) Dr Lim Wee Kiak, Mr Amrin Amin, Mr Khaw Boon Wan, Mr Ong Ye Kung and Mr Vikram Nair at the Sembawang GRC Post-National Day Rally Dialogue – Voices of Youth at Canberra Community Club on Sep 2, 2018.

SINGAPORE — Amid spirited public debate on the lease expiry of public housing flats, Coordinating Minister for Infrastructure Khaw Boon Wan stressed on Sunday (Sep 2) that Housing and Development Board (HDB) flats are an appreciating asset, although the increase would not be "as sharp as" in the past due to moderating economic growth in Singapore.

Speaking to youths at a grassroots event in Sembawang, he also added that while flats are appreciating assets "theoretically", they will depreciate at some stage, and he does not know what the turning point is as there is no market data on it.

Housing and the value of HDB flats was one of the key issues that the participants raised during the post-National Day Rally dialogue on Sunday. The session was attended by Mr Khaw, Education Minister Ong Ye Kung, and other Sembawang Group Representation Constituency (GRC) Members of Parliament (MPs).

Mr Khaw noted that there is a strong correlation between property prices and economic growth. When Singapore's economy was expanding between 8 and 10 per cent two to three generations ago, property prices would double every few years.

He said: "That's why you heard of, say your grandparents buying a flat, maybe in Woodlands for S$30,000, S$35,000, (that's) very cheap right? But right now, they can sell for at least S$250,000."

However, the current generation of Singaporeans would not be able to enjoy such a "huge increase" as economic growth rates are now trending between 2 and 3 per cent, said Mr Khaw, a Sembawang GRC MP and grassroots adviser.

"That is the critical difference between (your parents' and grandparents' generation) of living, growing up in a third world, transforming to first world, and yours, born into already a first world, almost first world economy," he added.

But barring any adverse circumstances, such as a war or an economic downturn, Singaporeans can still expect their HDB flats to appreciate, just "not as fast as" before, said Mr Khaw.

Notwithstanding the slower growth, Mr Khaw noted that the current growth figures are still considered "very good for a mature economy".

While HDB flats are an appreciating asset, Mr Khaw said that they will depreciate in value towards the end of their 99-year lease.

"But at what point will it begin to depreciate and hit zero at year 99, we don't know because there are no market statistic for it," he added.

"When will that turning point be, is it year 80, year 70, year 90? I don't know."

Besides the hot potato issue on HDB's lease expiry, participants also raised questions on how the new initiatives such as the Home Improvement Programme 2 (HIP 2) and Voluntary Early Redevelopment Scheme (Vers) would be implemented.

 

HIGH COST OF LIVING 'PROBLEM OF SUCCESS'

The rising cost of living was also another issue that dominated Sunday's dialogue. Youth participants presented various suggestions on how the cost of healthcare and food could be managed. For example, visits to a General Practitioner could be made more affordable, as well as reducing rental costs for food providers, and having hawker food priced at S$3 or lower.

Instead of adopting a singular viewpoint towards cost of living, Mr Khaw said Singaporeans should focus instead on growing their income.

Agreeing, Education Minister Ong Ye Kung said the more important question to answer, beyond the often-talked about issue on how to distribute taxes and subsidies, is how Singaporeans can earn more together.

Both ministers said education is a key factor in equipping Singaporeans with the necessary skills to afford the high costs.

Citing rising costs of living as "two sides of the same coin", Mr Khaw said a significant contributor of rising costs are the wages of other Singaporeans, such as hawkers and taxi drivers, who would also want to see their income growing every year.

He added: "In fact, high cost of living is a problem of success. High cost of living means things have improved. … For as long as Singapore succeeds, cost of living inevitably will rise, (and) it should rise."

Sembawang GRC MP Vikram Nair said that Singaporeans should view increased cost of living as "paying someone else a higher wage", which as a result was "actually a good thing".

Responding to the suggestion of capping the price of hawker dishes at S$3 or less, Mr Ong said that would be akin to price-fixing, a policy that has resulted in disastrous consequences in other countries.

Mr Ong, who is also an MP at Sembawang GRC, said that the optimum method is to allow market forces to determine prices.

However, he added that the Government can still help those who are unable to afford to buy goods at market prices by taxing the rich and providing subsidies to the poor.

Questions on healthcare and education costs were also raised by the participants, and the MPs pointed out that several financial assistance schemes are already in place to help needy Singaporeans.

 

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