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9/25/2009

Myth 211 - Public housing cheaper than private properties

Most Singaporeans believe, superficially, that public housing are cheaper than private properties. Is this true? In truth, public housing is expensive like hell. Let me use some simple statistics and formula to prove this. Just like there are many formulas and creative ways of computing affordability of public housing, let me prove that public housing is really expensive relative to privately developed housing. A 5rm HDB flat at $500k for 99 years will cost $5000 a year to the owner to live in the property. A private condo of a similar size at $1.5m for 999 years or freehold, will cost the owner $1500 a year. Can this be true? Of course it is true. A 3000 sq ft landed property could be had for $2.5m or $2500 a year. And this is double the size of a 5 rm flat. The govt and the banks should review their housing and loan policies. I would suggest that the govt build public housing for foreigners and repackage private housing with 999 yrs or freehold lease for Singaporeans. And the banks should allow Singaporeans to repay the loans in 3 or 5 generations or more. A 100 yr or 500 yr loan and the borrower needs only to service the interest computed annually at a special rate like the HDB's. With the 999 yr or freehold property as collateral, and appreciating in prices, the borrower can choose to liquidate when the price doubles or triples, or continue to let the descendants to service the loan repayments. The bank has no fear with an appreciating asset in the bank vault. Such an approach will see Singaporeans owning 999yr/freehold properties while foreigners live in 99 yr public housing. Of course the quality of public housing can be upgraded and the price be according to market pricing. Think about it.

1 comment:

Matilah_Singapura said...

Take note: govt "free stuff" ends up costing more over time.

The same thing will occur with any other "welfare" program -- like public education or public healthcare. They star out "cheap and affordable", and then over time costs spiral, bureaucracy grows, the programs become political bludgeons (to whack voters in their gonads) and eventually the PUBLIC (i.e. individual citizens) now TRAPPED in the system have to pay through the nose or contend with sub-standard over-priced govt services.

Since the govt essentially monopolised the services, there's no competition to offer competing services at competing prices.

Congratulations! The People Get The Government They Deserve!