The problem with housing subsidies

THAT most Singapore residents own their homes is something to be lauded. Generous subsidies from the government, which help shave the effective purchase cost of public housing, improve affordability for sure. The aid extended also helps prop up household net worth, given that a big chunk of wealth is contributed by the value of residential assets.

While there are immediate benefits to housing subsidies, Leslie Yee argues that such handouts could be fuelling Singapore’s home price inflation and leading to overconsumption of property. 

A new Build-To-Order (BTO) four-room flat might be priced at 30-40 per cent below older comparable resale flats nearby, Leslie points out. In many cases, the profits that come out of selling subsidised BTO flats go straight into the pockets of developers selling condos to upgraders.