Housing problems remain for Singapore gov't
By Jessica Cheam, The Straits Times/Asia News Network
March 22, 2011, 10:28 am TWN
SINGAPORE -- When Singapore's Committee of Supply sat in Parliament recently, the National Development Ministry was asked if it could have anticipated the surge in demand for Housing Board (HDB) flats that has led to the record-high resale flat prices seen today.
Could HDB and the Immigration and Checkpoints Authority, for example, have coordinated more in monitoring the influx of foreigners and its impact on housing demand?
The argument is that if the government-owned HDB had seen it coming, it should have built more flats earlier and eased the current supply crunch.
In answering the question, Minister Mah Bow Tan invoked images of the infamous HDB “ghost towns.” It was less than a decade ago that a surfeit of completed but unsold flats led to many near-empty HDB blocks in areas like Sembawang, Jurong West and Sengkang.
In 2005, there were still a staggering number of about 10,000 flats that were languishing in the market unsold.
“Home-owners paid a price for the oversupply then,” said Mah, recalling the concern from citizens about safety, theft and deterioration of the empty flats.
Others griped about the negative effect the overhang of unsold flats was having on home prices.
Now, Singapore seems to have swung from one extreme to the other — from oversupply to undersupply. There is much unhappiness about the latter, but people have forgotten that oversupply is just as bad as undersupply, said Mah.
The government's challenge, therefore, is to find the “sweet spot that is not too much, not too little,” he added.
It's worth looking at both these statements more closely. Is an oversupply of flats really just as bad as an undersupply? I think many would disagree, for two reasons.
The first is that an oversupply of flats is a hyper-local problem that affects only certain new towns. For those who do not live in them or near them, the problem is out of sight and out of mind.
An undersupply of flats, on the other hand, is very much a national problem that affects all young married couples and others such as upgraders.
Second, an oversupply problem potentially depresses flat prices, but this affects mostly potential sellers, who already have a home.
An undersupplied market, on the other hand, affects buyers who do not yet have a home to call their own and are in urgent need of one to start families.
They also include upgraders who need more space because their children have grown.
The impact is more immediate on a wider spectrum of the population — people who want a home so they can move on with their lives.
This unhappiness could translate into a higher cost, politically, compared with an oversupply situation, for the current government.
This brings us to the second of Mah's points: that however difficult it may be, it is critical for the government to find the “sweet spot” between the two evils.
Logically, this means finding some sort of middle ground between two systems that have been at opposite extremes.