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[h=2]nation held hostage by real estate[/h]
> An entire nation held hostage by the property market
> November 16, 2011 by admin
> Filed under: Current Affairs and Politics
>
> Written by Ng E-Jay
> 16 November 2011
> Singapore is one of the few countries, if not the only country in the world whose government explicitly states that property does not simply provide shelter, but is also an investment, a nest egg, a retirement plan, and an asset that is meant to grow appreciably in value over time.
> Is that really logical? A rising stock market is a sign of growing corporate profits, and increasing gross national product. But what forms the foundation of a rising property market? Why should, and how can, a government mandate that property values must always be on the rise, and furthermore, always increase at a respectably fast pace?
> The PAP’s policy of property price appreciation started when Mr Goh Chok Tong became Singapore’s Prime Minister at the start of the 1990s. Since then, the PAP government has mandated that Singaporeans must be invested in the country via property ownership. A rising property market has become the government’s way of anchoring Singaporeans to the country. Is this policy well-founded?
> To answer this question, we must first examine the fundamental factors governing property prices.
> Property values are affected by four things:
> GDP per capita,
> scarcity of land,
> population growth, and
> inflation.
> When GDP per capita grows, property prices tend to increase as well because personal incomes as well as the overall wealth of the nation is rising. On this metric, Singapore has done remarkably well thus far. According to World Bank statistics, Singapore’s GDP per capital rose from US$395 in 1960 to US$43,867 in 2010, measured in current US dollars.
> Going forward however, as the global economy slows down and Singapore’s economic growth potential approaches its natural limit, our annual growth in GDP per capita will also slow dramatically. This is not something we will be able to avoid. The exponential growth over the past 50 years simply cannot be repeated. In fact, it is wildly unsustainable, as I’ve argued in previous blog postings.
> Land in Singapore will always remain very scarce no matter how much we reclaim. This will definitely limit the downside of property prices. But scarcity of land alone cannot guarantee continued upside in property prices, if no other factors come into play. That is why we must pay special attention to population growth and inflation.
> For the past twenty years, the PAP has embarked on a policy of population growth via importing foreigners. At first, foreigners came in gradually and they did indeed complement and add value to our workforce. In the past decade however, the PAP government got very much more aggressive in opening the floodgates to foreigners. It became not so much adding value to the workforce, but more about pushing up GDP by sheer increase in labour supply. And in the past five years, the rapid influx of foreigners has driven property prices to the roof.
> Can this be sustained? The answer is definitely not. We are constrained by land, and our social fabric cannot take an indefinite amount of stress and strain. Population growth via foreign influx must slow and eventually come to a halt before both society and infrastructure break down. As the influx of foreigners decreases over time, the upwards push on property prices will also diminish. The bubble will eventually burst and many current home buyers will be stranded.
> How about inflation then? Singapore has seen high inflation in the past few years because of the rising prices of commodities and raw materials worldwide, and because our government has discreetly allowed our banking sector to absorb large amounts of foreign funds.
> A high inflation rate is also correlated with rising property values. But high inflation in itself is not a good thing. It erodes our purchasing power over time and leaves us all impoverished. A rising property market does not do anyone any good if the prices of all other goods and services rise at an even faster rate (which is basically what has already begun to happen).
> The PAP government’s policy of asset price appreciation is therefore based on flawed economic principles and models.
> So far, up till the last general election, the government has always manipulated the property market by refusing to build ahead of demand, and by allowing a rapidly expanding base of immigrants and foreigners to push prices up. Moving forward, such a policy cannot be sustained because basic economics simply will not permit it.
> An inflated property market has caused a massive misallocation of capital in Singapore. It has made the people asset rich but cash poor, and therefore has indirectly led to reduced consumer spending. This is why Singapore is unable to diversify away from an export driven economy.
> Furthermore, more cash pumped into property means less cash available for domestic investment. In order to grow our economy, we therefore have to attract large amounts of foreign capital. Our stock market has languished compared to regional bourses because all our domestic wealth is being put into property rather than invested in profitable businesses.
> In short, our entire nation has been held hostage by the property market.
> Our property market has created a chasm, a deep divide in society. Owners of commercial property and other landlords have the ability to increase rentals dramatically because of the government policy of asset price appreciation. When rentals increase, businesses have no choice but to pass the increased costs to consumers. It is the man on the street who suffers. It is the students, the housewives, the elderly and the poor, who bear the brunt of an increased cost of living.
> For example, it was recently reported that hawker stall owners are profiteering by transferring or renting their stalls out at inflated prices. As a result, hawkers have to raise their prices in order to stay in business, and hawker centre prices are now comparable to food court prices. How can a poor person in Singapore survive on a mere $400 per month Public Assistance handout when he or she has to cope with such rapidly rising prices? It is ridiculous.
> In reality, rising property values benefits the upper echelons of society disproportionately whilst leaving the working class citizens in financial hardship. And all because of our government’s greed and its failure to pay enough attention to sustain growth.
>
>
> An entire nation held hostage by the property market
> November 16, 2011 by admin
> Filed under: Current Affairs and Politics
>
> Written by Ng E-Jay
> 16 November 2011
> Singapore is one of the few countries, if not the only country in the world whose government explicitly states that property does not simply provide shelter, but is also an investment, a nest egg, a retirement plan, and an asset that is meant to grow appreciably in value over time.
> Is that really logical? A rising stock market is a sign of growing corporate profits, and increasing gross national product. But what forms the foundation of a rising property market? Why should, and how can, a government mandate that property values must always be on the rise, and furthermore, always increase at a respectably fast pace?
> The PAP’s policy of property price appreciation started when Mr Goh Chok Tong became Singapore’s Prime Minister at the start of the 1990s. Since then, the PAP government has mandated that Singaporeans must be invested in the country via property ownership. A rising property market has become the government’s way of anchoring Singaporeans to the country. Is this policy well-founded?
> To answer this question, we must first examine the fundamental factors governing property prices.
> Property values are affected by four things:
> GDP per capita,
> scarcity of land,
> population growth, and
> inflation.
> When GDP per capita grows, property prices tend to increase as well because personal incomes as well as the overall wealth of the nation is rising. On this metric, Singapore has done remarkably well thus far. According to World Bank statistics, Singapore’s GDP per capital rose from US$395 in 1960 to US$43,867 in 2010, measured in current US dollars.
> Going forward however, as the global economy slows down and Singapore’s economic growth potential approaches its natural limit, our annual growth in GDP per capita will also slow dramatically. This is not something we will be able to avoid. The exponential growth over the past 50 years simply cannot be repeated. In fact, it is wildly unsustainable, as I’ve argued in previous blog postings.
> Land in Singapore will always remain very scarce no matter how much we reclaim. This will definitely limit the downside of property prices. But scarcity of land alone cannot guarantee continued upside in property prices, if no other factors come into play. That is why we must pay special attention to population growth and inflation.
> For the past twenty years, the PAP has embarked on a policy of population growth via importing foreigners. At first, foreigners came in gradually and they did indeed complement and add value to our workforce. In the past decade however, the PAP government got very much more aggressive in opening the floodgates to foreigners. It became not so much adding value to the workforce, but more about pushing up GDP by sheer increase in labour supply. And in the past five years, the rapid influx of foreigners has driven property prices to the roof.
> Can this be sustained? The answer is definitely not. We are constrained by land, and our social fabric cannot take an indefinite amount of stress and strain. Population growth via foreign influx must slow and eventually come to a halt before both society and infrastructure break down. As the influx of foreigners decreases over time, the upwards push on property prices will also diminish. The bubble will eventually burst and many current home buyers will be stranded.
> How about inflation then? Singapore has seen high inflation in the past few years because of the rising prices of commodities and raw materials worldwide, and because our government has discreetly allowed our banking sector to absorb large amounts of foreign funds.
> A high inflation rate is also correlated with rising property values. But high inflation in itself is not a good thing. It erodes our purchasing power over time and leaves us all impoverished. A rising property market does not do anyone any good if the prices of all other goods and services rise at an even faster rate (which is basically what has already begun to happen).
> The PAP government’s policy of asset price appreciation is therefore based on flawed economic principles and models.
> So far, up till the last general election, the government has always manipulated the property market by refusing to build ahead of demand, and by allowing a rapidly expanding base of immigrants and foreigners to push prices up. Moving forward, such a policy cannot be sustained because basic economics simply will not permit it.
> An inflated property market has caused a massive misallocation of capital in Singapore. It has made the people asset rich but cash poor, and therefore has indirectly led to reduced consumer spending. This is why Singapore is unable to diversify away from an export driven economy.
> Furthermore, more cash pumped into property means less cash available for domestic investment. In order to grow our economy, we therefore have to attract large amounts of foreign capital. Our stock market has languished compared to regional bourses because all our domestic wealth is being put into property rather than invested in profitable businesses.
> In short, our entire nation has been held hostage by the property market.
> Our property market has created a chasm, a deep divide in society. Owners of commercial property and other landlords have the ability to increase rentals dramatically because of the government policy of asset price appreciation. When rentals increase, businesses have no choice but to pass the increased costs to consumers. It is the man on the street who suffers. It is the students, the housewives, the elderly and the poor, who bear the brunt of an increased cost of living.
> For example, it was recently reported that hawker stall owners are profiteering by transferring or renting their stalls out at inflated prices. As a result, hawkers have to raise their prices in order to stay in business, and hawker centre prices are now comparable to food court prices. How can a poor person in Singapore survive on a mere $400 per month Public Assistance handout when he or she has to cope with such rapidly rising prices? It is ridiculous.
> In reality, rising property values benefits the upper echelons of society disproportionately whilst leaving the working class citizens in financial hardship. And all because of our government’s greed and its failure to pay enough attention to sustain growth.
>
>
