“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property expected to continue to rise despite govt measures, Karamjit Singh)

We read Mr. Singh’s comments and we did a bit greater research. We agree with Mr. Singh’s comments. (Read the following for the detailed research)

Singapore’s inhabitants (in ’000s) according to the Singapore department of statistics are: -

Year Total Singapore

Residents

2000 — 4,027.9 — 3273.4

2001 — 4,138. — 3,325.9

2002 — 4,176. — 3,382.9

2003 — 4,114.8 — 3,366.9

2004 — 4,166.7 — 3,413.3

2005 — 4,265.8 — 3,467.8

2006 — 4,401.4 — 3,525.9

2007 — 4,588.6 — 3,583.1

2008 — 4,839.4 — 3,642.7

2009 — 4,987.6 — 3,733.9

The population increase in 2006 over 2005 is a net growth of 135,600

The inhabitants increase in 2007 over 2006 is a net increase of 184,000

The population increase in 2008 over 2007 is a net surge of 250,800

The population increase in 2009 over 2008 is a net expansion of 148,200

There is a nice table at http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html which shows the relative increase rates of HDB. We are not against importing talent, but not even the USA have such a huge import quota. We are worried that the government has run out of ideas to grow the economy and is resorting to brute force economic growth.

Based on household size of 3.5 people (Source: Singstat), this would translate into a potential housing demand of: -

2006 – 38,743 units

2007 – 52,571 units

2008 – 71,657 units

2009 – 42,342 units

“In year 2006, we were building about 2,400 new flats. This year, we are

building about 8,000-plus new flats. Supply has gone up to meet demand. That’s

why HDB prices have gone up but they have not gone through the roof.” (Source: Straits times)

MASS Marketplace HDB BEING PROPPED UP

Many of these new supplies were “Built-to-order” flats which generally can take 3 to 4 years to finish adding to severe shortages of HDB houses.

Singapore resident’s need from Household formation (Marriages) come in at a range of 23,000 to 25,000. These new young couples really need somewhere to stay in. Why didn’t the HDB foresee the need? household formation is a situation which is very very easy to guess and fairly consistent over the years.

Besides that, although not all immigrants are given Permanent resident (PR) status, these individuals must normally end-up staying somewhere driving up leasing yields.

Leasing rates are being pushed up.

Hdb property prices are now being pushed up.

WHAT IS THE LIKELY End results?

Without the benefit of much selection, Fussy Singaporeans will be forced to choose unattractive locations for example Punggol which in the past has unwanted units. Not only that, some may not wait and instead go directly to buy private housing.

HDB flat house owners whose valuations have gone up and are sitting on profits will now consider to sell their HDB and buy a private unit instead. There is currently no shortgage of supplies of Private properties at around 60k units over several years. This is easily 7 to 8 years of supply based on average consumption trend.

The end effect is that a greater proportion of people are going to end up dwelling in Condominiums and private apartments. This will deplete supplies and bring smiles to property developers in Singapore.

The Singapore government on the other hand will be happy that price ranges of land will surge and reach the land’s minimum reserve price to trigger a bidding process. Additional land sales equal more revenues for the government. And more builders bidding for land means higher prices. These higher prices are then translated into higher priced condominiums. Singaporeans needs to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the big price ingredient is the land price.

PERFECTING THE ART OF MICRO MANAGEMENT

Singapore has enhanced the art of micro-management. At $8000 family income, HDB income limit, you can’t buy HDB flats. At $10,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore. At a household income of $10,000 onwards, the Singapore government highly encourgage you to move upwards in consumption. Consumptions helps growth tax revenues (annual real estate tax, stamp duty, transaction fees for residence agents which translate into taxes), and helps the economy in creating jobs.

WHAT THIS Signifies Pertaining to THE SINGAPORE Home BUYERS AND THEIR HOUSING LOANS?

For those who are Singapore Property buyers, you ought to be informed that there’s a slow-moving shift in Singapore Government policy in play. The government is the largest land-owner, it can control supply to impact prices. Being an honest and efficient Singapore government bent on maximising land efficiency, you may expect land charges to continue on to rise and set new standards.

These subtle or not so understated policy recommendations will either enrich or impoverish you. And when you look at your Singapore housing loans, you ought additionally to take care to choose the right framework to cash in on these unwritten government policies or mis-calculations.

We do not promote or reject any government guidelines, we only high light such guidelines to the consideration of our readers so that they can find ways to benefit from these policies or final results of government’s miscalculations.

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