Pls clarify Yeoh Lam Keong's reasoning about resale HDB prices. [HDB lease extension proposal]
Did ex-GIC economist Yeoh Lam Keong apply faulty logic and quote an example unhelpful to his own argument?
"Resale flats also currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. If Prof Theseira's arguments were correct, resale prices should already be in the process of being pulled down to this significantly subsidised BTO price."
Prima facie, I AGREE with Prof Theseira that resale HDB price will DECREASE if BTO is priced without the land costs component but Mr Yeoh seems to be illogically alleging that the up to $160,000 HDB resale flat subsidy would have already DECREASED resale HDB prices without even having to decrease BTO sale prices. If any, this subsidy will INCREASE the resale flat prices since buyers now have up to $160,000 free cash handouts from HDB to increase their spending power. How can Mr Yeoh say that the $160,000 will lower resale flat prices? By what logic/ mechanism will this ever happen?
I can understand that Mr Yeoh is keen to help poorer Singaporeans, however his lapse in logic wrt the effect of the up to $160,000 subsidy needs to be clarified first.
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Forum: HDB reform proposals will further separate resale and BTO markets
Resale flats currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years.*
PUBLISHED: DEC 23, 2019, 5:00 AM SGT
I thank Associate Professor Walter Theseira and Mr Nicholas Mak for their comments on some of our HDB reform proposals (HDB lease top-up proposal has drawbacks: Observers, Dec 17).
Mr Mak argued that our proposed lease extension in Future of Singapore, presented by Mr Ku Swee Yong, Mr Tay Kheng Soon and me, would face popular outcry if it were ever stopped after introduction. But isn't this true of all good and necessary public social policies? Imagine the outcry if Singapore stopped selling subsidised flats or closed polyclinics. Is this a good argument for not introducing them?
He also argued that the provision of more cheap rental flats might prevent people from working harder. The relevant empirical research shows that lowering the cost of living for the poor to affordable levels has negligible effect on their incentive to work.
Following this argument, we should also not lower the prices of Build-To-Order (BTO) flats with grants or subsidise healthcare, or education either, as it might make citizens lazy.
Prof Theseira also commented that resale flat prices could in the end come down to construction costs if BTO flats were to be sold at construction costs.
However, our proposals are also to raise the minimum occupancy period (MOP) to 15 years. This would insulate the resale market from the cheaper BTO flats by extending the MOP well beyond the normal property cycle.
Resale flat values would also likely be boosted as they would now become a residential leasehold asset with an affordable means of leasehold extension.
Resale flats also possess a premium over BTO flats because buyers can choose their location as well as enjoy immediate purchase and sale.
Resale flats also currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. If Prof Theseira's arguments were correct, resale prices should already be in the process of being pulled down to this significantly subsidised BTO price.
Yet this is clearly not the case, as the BTO market is effectively still segmented from the resale market. This separation between HDB resale and BTO markets will be even more pronounced with our proposals.
Yeoh Lam Keong
https://www.straitstimes.com/forum/...-will-further-separate-resale-and-bto-markets
Did ex-GIC economist Yeoh Lam Keong apply faulty logic and quote an example unhelpful to his own argument?
"Resale flats also currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. If Prof Theseira's arguments were correct, resale prices should already be in the process of being pulled down to this significantly subsidised BTO price."
Prima facie, I AGREE with Prof Theseira that resale HDB price will DECREASE if BTO is priced without the land costs component but Mr Yeoh seems to be illogically alleging that the up to $160,000 HDB resale flat subsidy would have already DECREASED resale HDB prices without even having to decrease BTO sale prices. If any, this subsidy will INCREASE the resale flat prices since buyers now have up to $160,000 free cash handouts from HDB to increase their spending power. How can Mr Yeoh say that the $160,000 will lower resale flat prices? By what logic/ mechanism will this ever happen?
I can understand that Mr Yeoh is keen to help poorer Singaporeans, however his lapse in logic wrt the effect of the up to $160,000 subsidy needs to be clarified first.
======================
Forum: HDB reform proposals will further separate resale and BTO markets
Resale flats currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years.*
PUBLISHED: DEC 23, 2019, 5:00 AM SGT
I thank Associate Professor Walter Theseira and Mr Nicholas Mak for their comments on some of our HDB reform proposals (HDB lease top-up proposal has drawbacks: Observers, Dec 17).
Mr Mak argued that our proposed lease extension in Future of Singapore, presented by Mr Ku Swee Yong, Mr Tay Kheng Soon and me, would face popular outcry if it were ever stopped after introduction. But isn't this true of all good and necessary public social policies? Imagine the outcry if Singapore stopped selling subsidised flats or closed polyclinics. Is this a good argument for not introducing them?
He also argued that the provision of more cheap rental flats might prevent people from working harder. The relevant empirical research shows that lowering the cost of living for the poor to affordable levels has negligible effect on their incentive to work.
Following this argument, we should also not lower the prices of Build-To-Order (BTO) flats with grants or subsidise healthcare, or education either, as it might make citizens lazy.
Prof Theseira also commented that resale flat prices could in the end come down to construction costs if BTO flats were to be sold at construction costs.
However, our proposals are also to raise the minimum occupancy period (MOP) to 15 years. This would insulate the resale market from the cheaper BTO flats by extending the MOP well beyond the normal property cycle.
Resale flat values would also likely be boosted as they would now become a residential leasehold asset with an affordable means of leasehold extension.
Resale flats also possess a premium over BTO flats because buyers can choose their location as well as enjoy immediate purchase and sale.
Resale flats also currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. If Prof Theseira's arguments were correct, resale prices should already be in the process of being pulled down to this significantly subsidised BTO price.
Yet this is clearly not the case, as the BTO market is effectively still segmented from the resale market. This separation between HDB resale and BTO markets will be even more pronounced with our proposals.
Yeoh Lam Keong
https://www.straitstimes.com/forum/...-will-further-separate-resale-and-bto-markets
