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4/28/2011

My affordable housing scheme

Sure affordable, and the lessee can choose the number of years he wishes to repay the lease, or loan, or whatever. Buyers or lessees can choose to pay in 30 years, 60 years or 90 years. The repayment period will be so flexible that the lessee can pay in one generation, two generations or three generations, with two incomes, 4 incomes or 6 incomes as long as the monthly repayment sum is affordable. Now would this be a better way to sell affordable housing? Can raise the price higher some more. I was thinking of extending the repayment period to 200 years, but unfortunately the lease will expire in 99 years. And all lessees can still call themselves property owners. Actually owning a 30 year lease or 99 lease or freehold property is all the same, property owners.

5 comments:

Matilah_Singapura said...

Once you raise mortgage terms to such high time periods, you know there is already trouble. This was tried in Japan – with disastrous results whose effects are still observable today.

The problems with HDB are numerous, and they all have a root cause: the 'working contradiction' that it is both public housing, but also a private asset. When it comes time to upgrade or maintain the property – it is public and thus the responsibility of the govt to pay for it, and the govt to 'fix' a low interest rate. However as far as values are concerned – it becomes a private asset and any gains from 'owner' sales is private profit.

In other words the costs are socialised, but the gains are private. And by golly, do people love their private gains – which another reason the prices are high: Sellers know they can stand firm on the price. And why not? They've had a 'free ride' for years – paid low interest rates and seen their home steadily rise in value.

Redbean, you are only looking at one side of the issue. I can tell you that many S'poreans have pay off their HDB before they are 45, and are elated when market values rise. They feel vindicated that the home they've worked hard for is an 'appreciating asset' (even if it really isn't an asset in the true sense) and this is a HUGE psychological boost.

If you are in your 50's and 60's or 40's and nearly paid off your HDB, the last thing you want is some smart alec coming along to bring in policy which will drop the market price of your 'asset'. Many of these folks cash-out their HDB when the children grow up, marry and move out and downgrade, pocketing the profits from the sale. At age 50-70, who doesn't want extra cash?

Then there are those who flip out of HDB into the private market. There are hundreds of thousands of such people. They do well, find that they can finally afford a condo or semi-d, then sell their appreciated 'asset' and move out of the heartlands. Upward mobility redbean – that's what S'pore is world-renowned for.

People are making money from HDB And if you try to fuck with that, they will rebel. It is to be expected. In economics this is known as 'moral hazard' – where the public in total bears the cost, but the the benefits are personal and individual.

Once people are locked into that, it is almost impossible to get out. The whole issue becomes a political tool, and both sides square off against each other.

I can only se one solution: either HDB returns to PURE public housing – i.e. no more talk of 'asset' or 'appreciation' – everyone pays the same amount of rent, say $5-$10 psf, no one has any ownership, or it goes completely private market with no subsidies, no politics, and you buy what you can afford and fully own it once you've paid up.

Anything in-between will create moral hazards – there is no getting around that.

Chua Chin Leng aka redbean said...

Matilah, there are several flaws in my article and in your assertions. One, any jokers who thinks it is ok to keep stretching the repayment period more than 30 years is crazy. Send him to IMH. A 99 year lease must come to an end. Two, any joker that think that the debt can be spread out to more and more people to co pay, so they can keep increasing the price, is also crazy. Also must send to IMH.


The cost of maintenance is all foot by the residents in one way or another. All the subsidies etc, you can believe in them, I don't.

The most silly thing is to believe the word affordable. Because it can be twist and turn to suit anyone's definition. Now it seems that every joker has been conditioned to accept that repaying in 30 years with two incomes is reasonable.


People forgot about where it was and how it was. The 30 year and two income repayment, is rubbish. Don't have to. It could be done quite easily with one income and 30 years, and less than 30% of the one income's monthly pay.

Remember how to boil a frog to death? The incremental change becomes a new base level of pain. The pain level has been increased so high, but the silly masses are ignorant of it, or trying to live with it.

Matilah_Singapura said...

redbean, All your points are reasonable.

However there is no way around the moral hazard, and as you've indicated, people have fallen for this brilliant scam over decades of slowly raising the temperature of the water.

The point I'm focusing on is one of culture. Once a culture is embedded, good luck in trying to change it.

People are making money from their 'public housing'. Rising asset values is a culture. HDB market is alive because everyone believes that 'you can't lose'.

Now you can call all these people stupid sheeple or any other epithet, but the fact remains the only people who want to see HDB's fall are the buyers -- but only for the period that they buy. After that, once in, they want the prices to rise.

I don't think IMH is large enough to accommodate all these fuckers, so they turn to their politicians to 'solve' the problem, but the politicians -- all of them on every side -- knows that the HDB card is a powerful, manipulative political tool.

It's a culture, uniquely Singaporean, but essentially human: self-interest.

Chua Chin Leng aka redbean said...

The indisputable truth is that all Ponzi scheme must go bust. It is only when. They are delaying it by SERS. What is dangerous is that the balloon will be blown even much bigger before it bursts.

This housing scheme is going to end up as a very sad story one day if they keep priming the price up

Matilah_Singapura said...

Relax, the scheme won't be collapsing anytime soone.

How do Ponzi schemes collapse?

Ponzi schemes collapse when buyers leave the building -- i.e. no more buyers to fuel the scheme. It is all very well for a straight-up money con -- you walk away, lick your wounds.

Not so with housing. You can't walk away, you need a place to live and the private market is out of the question.

Immediately you are trapped by the HDB/ CPF thing. Over 80% of Singaporeans are.

If you can clear the smoke, you will see the unseen beneficiaries of this HDB -- Wall Street. Every CEO of every MNC based in S'pore LOVES HDB. They know their workers are well housed and 'motivated' to work. Just about every working stiff in Singapore works for one reason : To pay bills, and a mortgage is a serious chunk of monthly change.

A worker who has a sense of 'security' as far as his family is concerned is a productive worker. He's happy to have the job. He looks forward to his CPF contribution every month which pays his mortgage and MediSave.

So there's the 'stick'. If things got politically rough, offer a 'carrot'. Homebuyer subsidies for 1st home owners -- don't worry, S'pore can afford it -- not forever, but just enough for political expediency.

Worst case: small levy on the MNCs and maybe some SME's -- say, for e.g. $300 per year per worker. If necessary get Goh Chok Tong to come out and give anothe 'kway teow' speech to justify the tax.

No CEO will balk at that: he has happy, secure and productive workers to keep Wall Street smiling. and he is already paying fuck all in taxes anyway.

No, this Ponzi scheme has a lot more life left in it.