Recently i received a reply from my army pal kheng meng with regards to my previous posting on the GE. This is my reply to his article before i fly off to vietnam on holiday tomorrow.
In 2008 the world suffered a major financial collapse. America was badly hit. The housing bubble there had burst! The cause of the problem was attributed to banks being allowed to go about giving away loans freely, without a care in the air except with regards to their ludicrously high pay checks. Since then, the states and the world at large have learnt their lesson that too much of anything can potentially be bad. I also believe in a need to regulate any free market. I guess what kheng meng and i disagree is to what extent it has to be regulated. For me, i will try my utter best to restore and protect the inherent value mechanism in a free market, but intervening to ensure that the fundamentals stay sound. Nothing more. Now let’s get down to the issue.
Kheng meng suggested that we build more flats/houses. My reply is that yes we can build more, but not much more. The fact is clear from day one. Singapore is just too small, we have little land. Building taller and underground is again a short term solution. You can only build as low as the ground ends and as tall as perhaps the tallest building in the world, but all of these will cost lots of money.
SDP wants to peg the cost of housing to the cost price, except they have a rather warped idea of what is the cost. When you buy a house, you also buy the land its seating on. This principle is universal, its not just in singapore. The reason is because you are depriving the land of whatever opportunity cost it might have. IE. what it could have been used for otherwise. Most of opposition proposal asks for government to make discounts for the land. The question is that how much discount is a fair one? And if i do give a discount, how can i be sure you won’t start asking for more until it becomes free. Kheng meng claims that its only for first time buyers. But isn’t everyone once a first time buyer? you can’t skip the first time and immediately be 2nd. Essentially this proposal will affect every buyer that still has not bought their flat from now till eternity, and that is a lot of people.
Kheng meng then continue to suggest more short-term solutions like change MOP to 10 years. My question is why not 20, or 30 or maybe 99? This restriction of buying and selling only aims to lock people into their homes. Many people want to upgrade their homes as they pursue their dreams. Sure it will counter speculation, but how can you be sure such a move will not affect these people who really wants to live there. In my opinion the government’s move to restrict each person to 1 property makes more sense because then that will be the only house they can live in, and not bought for investment.
Secondly to lock PRs out of public housing is a rather unfriendly concept. Those PRs may actually be of good use to our country and they need a place to stay. If we want to control the number of PRs it should be at the gate, and not when they are already in the country. This will only make their life difficult. I agree with KM’s last point on renting out the HDB.
I wish to add in certain discoveries i have made with regards to this issue. Singaporeans should not allow their flats to be devalued. There are many questions right now about housing being expensive and wiping out their CPF monies. With the CPF monies gone how do they retire. Well the thing is, the money isn’t gone, its just moved into the house. The house as an asset is a good thing. It allows you to practise this wonderful concept called the reverse mortgage. The reverse mortgage is similar to a loan, except its the bank that is paying you the money. Essentially you are banking on the value of your house to gain a loan. Reverse mortgages are very good for retirees who are asset rich and cash poor. If however their property value tanks, they can no longer use their house as a collateral or leverage, which means this valuable avenue is closed out to them.
Why i think that the opposition’s proposal will affect the resale market. Every house in the resale market comes once from the first-time buyers market. Simple example: if you buy a baseball card that is worth 10$ for 1$ and you are a greedy person, you will not mind selling the card for 8$ in order to get quick cash, and its potentially 200k we are talking about. Of course the opposition can always talk about MOP again, of which i will refer back to the above. MOP locks a person into living in that house. That asset becomes a golden prison ball, you know those huge heavy balls that prevents prisoners from running? its just like that.
KM then ask how long my solution will take to give results. I will be honest and say that it will take a long time, but its the only viable solution. Long term solutions are not easy to achieve i must say. We cannot relinquish our commitment just because its too difficult or people are too urgent. Patience is a virtue.
KM points out the fairness issue. The thing is that its incredibly difficult to be absolutely fair. I would just have to say that i hope the quality education that the government’s investment in education and the people’s resolve to work hard will make up for whatever shortcomings. Everyone inevitably suffer from some vicissitudes of fate.
1. CPF. Maybe they can make cpf contributions optional, but that will be to our detriment. You can expect that those of the poor will largely be cut, because the companies aren’t really competing for them. Whereas the rich talents will probably receive more due to companies competing for them. CPF also helps for retirement.
2. For NS, i just can’t help but quote thomas jefferson.
“Every citizen should be a soldier. This was the case with the Greeks and Romans, and must be that of every free state.” – Thomas Jefferson
3. High cost of living. I agree with KM that this is out of our reach. Oil and food reserves are based overseas and not singapore.
KM has not address my argument that if we were to bar foreigners from doing jobs that singaporeans want and can do, won’t singaporeans get lazy/incompetent?
Grow and share
You know what they say. Give a man a fish and he won’t go hungry for a day, teach him to fish, and he won’t go hungry at all for life.
The reason why the growth isn’t trickling down is answered in my first post. The poor are not very financially literate. They rarely invest in stocks and otherwise. If they bought the STI, they might have obtained a 8-10% return. I think that my proposal on a nation wide financial literacy campaign is the best way forward. We need to teach people how to stake a claim for themselves in our economy.
KM thinks i am contradicting myself. I think he has misunderstood me. Let me ask you something. Isn’t controlling the supply of COE is the same thing as having the limited land we have to build houses on? The reason why we dun need COE for land is because you CANNOT IMPORT LAND LIKE YOU IMPORT CARS. Our country given its limited land can only support a number of vehicles. The quota of COE reflects that inherent limit. It does not affect the economic cause of demand and supply because this supply control is base on the land, and not base on the value of the vehicle itself. After controlling for land limit, then allow the value mechanism to act so that only the deserving will own the vehicles for whatever value the people aim to use it for. Without capping COE at a limit, there might be a case whereby the number of vehicles surpass the amount our land and roads can support. This is exactly what i meant when what is the point of having cars and roads when you cannot move on it.
KM claims that we should give taxi drivers discounts for ERP because that would drive demand for taxis but does not justify why this should be the case. First of all i am against vehicles and stuff because i believe they destroy the environment. Reducing ERP for taxis will make the place congested because taxis will then make a beeline for it, and even if they get no customers they might just keep going round or park somewhere in it.
I agree with KM’s post on public transport. And i would like to suggest staggering work timings. This will allow people to go to work at different timings. Even better, work from home if possible. A national movement will be a good idea.
What KM said about giving the opposition a chance is a good idea. However i still stand by the need for politicians to be elected base on their merit and good ideas and contribution rather than just because they are part of a contingency plan or exit strategy. This will undermine the quality of our future opposition party. What will stop them then from claiming their right for seats in parliament simply by virtue of being the other choice.