Has the middle income/sandwiched class's life regressed in Singapore?

[theDoors]

http://www.pap.org.sg/articleview.php?id=1514&mode=&cid=23

GST Hike: Helping the Sandwich Class
by Ms Seet Cher Lui Stephanie
Sengkang West Division of Ang Mo Kio GRC
Assistant Secretary, Young PAP
Dated : 14-02-2007

Prime Minister Lee Hsien Loong’s announced a 2% GST hike from the present 5% on 13 November 2006. PM Lee reasoned the GST increase as a necessity in order to “help lower income groups and the elderly”, as the revenue generated from the GST hike will go towards implementing social programmes, like Workfare, higher healthcare spending and preparing Singapore for an ageing population. General public concerns concentrated on the impact of economic restructuring on the middle class, as well as how a higher regressive tax, like GST, will improve the lot of the poor.


Economic Climate on the Middle Class

While the elderly and lower income groups will be better off with the GST offset package, recent economic restructuring appears to affect the middle income class the most. Given the climate of economic reforms, the impact of the GST hike on this group should not be evaluated in isolation.

The economy appears to have fully recovered from the 1997 Asian financial crisis, with 2006 registering a better-than-expected 7.6% growth. The government has also announced plans to restore CPF cuts.

There are, however, indicators of leaner times ahead, with the growing income divide being magnified with the emergence of a dual economy. Reports of middle class wage stagnation over the past ten years hardly suggest that the bullish economy benefits the majority of income-earners.


Identifying the Sandwich Class

The lack of a lucid definition of the sandwich class impedes identifying succinctly the needs of this income class and tailoring a suitable offset package to reduce the impact of the economic restructuring. It is pertinent to examine the various financial outlays of this group.

Rhetorically, a typical middle class family with two working adults may have a take-home income of $6000 a month. The couple has two school-going children and their aged parents live with them. They reside in a 5 room flat and have a saloon car. Despite their seemingly affluent lifestyle, this family may struggle with meeting their financial commitments with the implementation of the GST increase.


Case Study: Outflow and Plugging the Flow

The greatest expenditure for most families is housing and car payments. While the GST hike should prompt people to watch their spending, it also has a knock-on effect on interest rates, which significantly affects the group already servicing these loans. Rather than influencing market interest rates, offering rebates in conservancy and season parking charges can compensate for the GST increase.

Even with measures like the Baby Bonus and Edusave accounts, the cost of pre-school education and enrichment lessons has climbed in recent years. Increasing the top-up into these accounts, as well as raising the cap on the usable amount, can reduce the family’s expenses on the children’s education. In addition, a portion of the savings in the baby bonus account can be allocated into a special account for purchasing insurance for the child’s education.

Healthcare spending is set to increase in future, commencing with the use of Medisave for the treatment of chronic diseases. With the rationale that maintenance and prevention is more cost-effective than treatment of developed ailments, would the use of Medisave to subsidize annual health screenings for the population not be in line with this premise? This benefits all factions of the population as health conditions can be managed, in their early onset, within more economical non-hospital settings.


Suggestions from the Ground

The Internet has been abuzz with suggestions to address the concerns of the sandwiched middle class. Propositions ranged from introducing a GST refund system to reviewing income tax brackets to cater to the needs of the sandwich class.


Challenges Ahead

A clearer system of checks and balances should be in place to increase the level of public accountability on the spending avenues from the hike increase. The government is required to demonstrate an increase in social spending like healthcare, while maintaining the nation’s competitiveness for foreign investments. More importantly, however, is for the government to be responsive and attuned to public opinion. A tough juggling act, but one that is required to uphold the public trust in the integrity and transparency of public policies.


PMEs the hardest hit in during the 2009 downturn?

Title : Dispute resolution process to be put in place for mid-level professionals
By :
Date : 26 January 2010 1712 hrs (SST)
URL : http://www.channelnewsasia.com/stories/singaporelocalnews/view/1033124/1/.html

SINGAPORE: The Ministry of Manpower (MOM) will introduce an employment dispute resolution process to help junior and mid-level professionals, managers and executives (PMEs) earning up to S$4,500 and their employers address common employment issues.

These include salary arrears, retrenchment benefit payment and other employment-related contractual issues.

Manpower Minister Gan Kim Yong said on Tuesday this process will be in place next year.

Speaking at an industry conference, he said that as their representation in the workforce grows, more PMEs may face employment-related issues. They now form more than half of the local workforce, up from around 40 per cent a decade ago.

The dispute resolution process would primarily involve the use of mediation. It will ride on the existing tripartite partnership with the Singapore National Employers Federation (SNEF) and the National Trades Union Congress (NTUC).

Explaining the process, Mr Gan said MOM would lead the mediation session, with the support of SNEF and NTUC.

PMEs who are union members, but are not eligible for collective bargaining or limited representation, may make use of this proposed mediation process.

If the dispute cannot be resolved through mediation, the PME employee may pursue his claims through the civil courts. In addition, he may refer disputes on salary claims for adjudication by MOM.

Mr Gan said the setting up of this new dispute resolution process will help save PMEs and their employers the cost of going through the civil court route by giving them the opportunity to mediate at an early stage, with assistance from tripartite partners.

Through this tripartite partnership approach, MOM believes that many of such disputes could be resolved amicably.

The exact details are currently being worked out in consultation with the tripartite partners.

Employers say a quick way to resolve disputes is necessary.

"Salary disputes and retrenchment disputes, all these are money issues," said Stephen Lee, president of SNEF. "If you can settle it quickly, and you can just get on with life, rather than have it protracted. And some of these sums are not really big enough for the PMEs to want to take it to court and hire a lawyer."

The ministry is expecting the revised dispute resolution process to benefit more than 500,000, or half of all PMEs in the workforce as well as their employers.

Mr Gan also raised the issue of productivity. To address low productivity growth, he said companies must find innovative ways of delivering higher value products and services, redesign their systems for greater efficiency, invest in technology and train their workers.

- CNA/yb

Acknowledgement of the weakening buying power of the middle income/sandwiched class

SINGAPORE: National Development Minister Mah Bow Tan has reiterated the need for an income cut off limit when it comes to housing schemes.

Speaking to some 100 people at a post-National Day Rally feedback session organised by REACH, Mr Mah noted though, that it's not always cut and dry when it comes to dealing with the sandwich class.

These are first time home-buyers who earn more than $8,000.

Their incomes are too high for most new HDB projects, but are too low for private condominiums.

Mr Mah said the government does exercise flexibility at the margins and will address those with problems on a case-by-case basis.

During the two-hour session, Mr Mah devoted a substantial amount of time on housing and immigration issues.

He also said the government could do more to help the ageing population, without going into specifics.

One dialogue participant suggested that more couples would start families if more flats were built.

But Mr Mah said there's more that goes into family planning.

"It helps if you have a house. The fact that you don't have a house straight away doesn't mean you cannot have babies.

"Whether you have a baby or not, it's more than just having a house - it is your career, it is your wife's choice, it is your choice. So, it's not as simple as that," he said. - CNA/fa

 

[knowwhatyouwantinlife]

income is but a mere definition about one person's life...when we talk about income we have to talk about standard of living..lets classify (my own stratification: $3000 and below: diploma holders educated and below, mostly blue collars like taxi, bus drivers etc $3001 to $6000: Degree holders, most white collars and civil servants, low executive to middle executive level, semi professionals like engineers, nurses, therapist etc: $6000 to $10000: Higher management level, scholars, full professionals like lawyers, Drs (reg to senior reg levels), etc: $10000 and above: full fledged professionals, CEOs, civil service higher ranking officers, businessmen etc...) Actually hard to say who is middleclass family, compare the Dr who is at Reg rank earning $10K asking his wife to be homemaker and the 2 teachers in government schools earning $5K each to help each other support the family...both will be considered at the highest class by my definition...also what class you are in also depends on your spending and saving habits...most of us actually can shorten the HDB loan by more than half as long as we work 10 years to 15 years straight earning about $3K per month....its just that many of us choose to consume now rather than have a good balance...a good example is buying a car in SG...the white collar 5 day weeks no sales people can actually get a weekend car, go to work before 7, crash at the gym, then go for breakfast start work at 9 and leave at 7...that way can already save $17K over 10 years...also SG people love face, many people in USA, Aus, NZ, etc all driving second hand cars even though the mileage on the cars there are longer, SG folks have to buy new ones (usually also the GF or wife;s oopinions)...

 

[theDoors]

Sep 4, 2010
PROPERTY
Nothing wrong in having it both ways
http://www.straitstimes.com/print/STForum/Story/STIStory_574611.html

ASSISTANT money editor Fiona Chan analysed the Government's tough measures to cool the red-hot property market well in her commentary on Tuesday (''Targeted' cooling has wider implications').

Her assessment suggests that almost every home owner - upgraders, downgraders or simply people who want to make an HDB-to-HDB flat switch - is affected bar two categories: the wealthy and owners who own only one home and stay in it for the rest of their lives.

Most of us are not in the wealthy club and many of us move home at least once, for several reasons.

The multiple restrictions on home ownership affect most Singaporeans. Most of us aspire to own a dream home and we work for it.

A dream home could be a luxurious condominium or a modest HDB flat located near parents or children's schools.

The new property measures, as Ms Chan pointed out, target those who already own a home and are buying another for investment or speculative purposes.

Is it fair to inconvenience the majority of us who are not speculative?

What if we have plans to use property investment for future retirement or future educational funds for our children?

Should such plans be discouraged?

With the influx of foreigners increasing the pressure on housing, demand may well negate the economic gain ordinary Singaporeans should enjoy because of the new restrictions.

Why shouldn't Singaporeans be allowed to use property investment as a vehicle for growing wealth for future needs while living a modest life as an HDB dweller?

Many of us who are not wayward speculators will not benefit from the many restrictions on home ownership.

Joan Teo (Ms)


Copyright © 2007 Singapore Press Holdings.

 

[theDoors]

Rules tightening to return sanity to HDB resale market
05:55 AM Sep 03, 2010
by Colin Tan
Before Monday, if HDB resale flats were tradeable investment products on the screen of international ratings agencies, they would have attained a triple-A rating; so highly regarded were they by property investors.

However, all that changed when the Government announced measures to effectively close them to new investors and speculators. The new rules disallow concurrent ownership of HDB flats and private residential properties if the owner has not stayed in his public housing flat for five years.

Private property owners who buy an HDB flat now have to dispose of their private homes within six months.

When the ownership rules for HDB resale flats were relaxed just a few years ago - when prices were still depressed - no one could have foreseen how they would go on to outperform the private housing market in terms of rental yields and capital appreciation within just a few quarters.

In terms of risk, they were probably the safest investment property to spend your savings on. Almost as good as Singapore Government bonds, HDB flats were a safe haven compared to the surrounding financial turbulence.

Many had expected the opening of the two integrated resorts to strongly drive up the demand for private housing. As a result, values were chased up to unrealistic levels, only to disappoint when the widely anticipated boom did not materialise. Instead, the unrealistic price levels for private properties drove demand towards the public housing sector and kept them there.

Rental demand from both foreign workers and expatriates for public housing flats grew. Rental yields rose and soon caught the eyes of investors. Soon, more people began to buy them as investment properties - a trend noticeable as far back as 12 to 18 months ago.

At the same time, more and more would-be HDB upgraders could not cross the widening gap between the private and public housing sectors. Upgrading became restricted to a bigger flat type or a newer flat in a better location.

In the meantime, newly-formed households were moving into the housing market. Unlike in the private housing market, where a premium is paid for properties under construction, the premium in the public housing market is for completed flats or those nearing completion.

This is because demand for the former is driven by investors who pay more for the opportunity to speculate, while demand for the latter is driven by the need for immediate occupation.

Without the release of flats from upgraders, additional supply could only come from newly-maturing flats whose owners had occupied their properties for five years. New annual supply from this source is fixed as it is tied to events which happened seven to eight years ago.

Before long, a shortage developed and was made more acute by investors who were crowding out genuine households and raising overall sentiment and prices with their record-price buys. It did not help that new flat prices were linked to prices for resale flats which were fast becoming a full-fledged investment product and a safe haven from the excessive liquidity in the market.

New flats, with their myriad ownership rules, are definitely not investment products. They can never be truly comparable to resale flats. They are poles apart, as different as night and day. To make price adjustments from one to the other is to compare Singapore apartments in Woodlands to apartments just across the Causeway in Johor Baru. They may look the same and distance-wise, not far from each other but one commands a value significantly higher than the other.

The new rules announced on Monday bring them back a lot closer - in terms of minimum occupation period and ownership restrictions. This can only be good for the market. It makes the job of those who decide on the prices of new flats a lot easier.

To those who complain, these are not really new rules. We are just falling back on old ones which worked well in the past.

To investors, if you cannot afford to live in a private property and invest in another in the first place but want to live in an HDB flat and invest in one, you are probably the most vulnerable to a sudden and sharp downward price correction.

It may not be immediately obvious to you, but like a gambling addict, you need protection from yourself.


The writer is head of research and consultancy at Chesterton Suntec International.


URL http://www.todayonline.com/Commenta...htening-to-return-sanity-to-HDB-resale-market
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