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Housing: The people's equity stake in S'pore
FIFTY years ago, one critical issue for Singapore was whether it could house a burgeoning population. Now, that question has been turned on its head.
Has Singapore's policy to promote home ownership become so successful that it has culminated in double and triple home ownership to the point that policy interventions are needed?
When the government aimed at the outset to give Singaporeans "100 per cent home ownership", its motivation was simple - to give everyone a valuable and tangible stake in the country.
Singapore's first prime minister Lee Kuan Yew had in interviews called this his "primary preoccupation", believing that a home-owning society would be more stable than a home-renting one.
It would give national servicemen something to defend. It would give a nation of immigrants with no common roots a sense of ownership. It would also encourage citizens to vote responsibly. And as the country prospered and property values rose, they could share in the wealth creation.
But some now think that the lofty home ownership goal has outdone itself - with Singaporeans now owning not just one but multiple homes, not just as abode but also for investment, even speculation.
As a result, said Knight Frank Singapore executive chairman Tan Tiong Cheng, "the individuals who believe in property would have bought second or third properties to play landlord". Some, he added, "may even speculate, so if they can't own it but the timing is right, they may punt on property".
Mr Tan said that property investment and speculation in Singapore can also be attributed to the country being a small city-state with finite land mass.
In other countries, urban sprawl would make it harder to speculate on basic housing because people can simply buy a property further away from the central urban area. But in a compact society like Singapore's where options are limited, prices would move faster in choice locations, thus creating that opportunity for speculation.
The other factor that has fuelled investment and speculation is the morphing of Singapore into a global city with liberal immigration policies for skilled individuals as well as open capital markets.
"Much as we have improved home ownership among Singaporeans, we do allow foreigners to own condominium units and they too play a part in making property an investment and speculation tool," Mr Tan said.
The upward pressure has also had a trickle-down effect on HDB resale prices.
Over the period of migrant influx from 2005 to 2008, condominium and apartment prices went up 40 per cent while HDB resale prices rose 37 per cent.
Much of the demand came from wealthy buyers from regional countries such as Indonesia, China and Malaysia.
The government reacted quickly with eight rounds of cooling measures.
Some worked better than others. One that was particularly effective in tempering market fervour was the additional buyer's stamp duty (ABSD), which some see as a wealth redistribution tool due to its graduated scale for different groups of buyers.
To illustrate, foreigners buying a house here have to pay 15 per cent ABSD, while Singaporean buyers are spared ABSD for their first residential property. That said, they have to pay 7 per cent ABSD when they buy a second property, and 10 per cent for third and subsequent purchases.
Lee Liat Yeang, a real estate lawyer at Rodyk & Davidson, sees the ABSD as a means to narrow the income gap - wealthier foreigners and Singaporeans who want to own more properties have to pay more duties while Singaporeans buying a home just to live in are not affected.
The additional taxes can be used to build more public infrastructure, housing and transport systems, again redistributing the wealth, he said.
The seller's stamp duty - which discourages speculative "flipping" - and the Total Debt Servicing Ratio framework (which discourages borrowers from leveraging beyond their financial means) are the other major cooling measures.
Still, it is a delicate job trying to strike a balance between providing affordable housing for Singaporeans and providing investable properties for globally mobile talent and wealth that Singapore seeks to attract, he said. It is not in the government's interests to over-tax the rich and drive them away.
Singapore's home ownership rate is among the highest in the world. Last year it stood at 90.3 per cent. More than 80 per cent of Singaporeans live in HDB flats, and more than 90 per cent of them own their flats. (See infographic: Housing Singapore)
But these figures still leave about 10 per cent of resident households who don't own the roof over their heads.
For low-income families that cannot afford their own homes, the Singapore government extends a helping hand by leasing rental flats to them at heavily subsidised rates.
When these renters are ready to buy their own flat, there is also supply allocated for them to help them take their first steps to becoming a property owner.
Besides the poor, Associate Professor Sing Tien Foo of NUS Department of Real Estate noted, there is also an emerging group of more mobile home renters who either do not want to commit a big equity outlay in a house or are entrepreneurs who would rather invest their money in their business than in a home.
Nonetheless, many analysts believe that home ownership will continue to be relevant, even for the younger generation.
Said Knight Frank's Mr Tan: "It's already been more than two generations that Singaporeans have benefited from home ownership. We are approaching the third generation now, the Gen-Ys, and they too are looking at the world at large. I believe even they would see home ownership as important."
Singapore today is a different place from the one in the 1960s. This year, it was again named the world's most livable city for Asian expatriates by ECA International - a ranking it has held for 16 years - based on criteria such as air quality, infrastructure, healthcare, education, personal safety and political tension.
Last year, it saw a record 28,407 marriages registered - the most in the past five decades - which could be due to a bigger supply of new HDB flats available.
"A lot of people say when you are young, the first asset you should save for to put a downpayment on is a house, and I think that is still very true," Ong Choon Fah, chief executive at DTZ Southeast Asia, said.