Flat prices: enhancement or inflation

Posted: April 21, 2011 in Policy
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Minister of National Development Mah Bow Tan was quoted as saying in a Channel NewsAsia report that he’s proud of the PAP government’s asset enhancement policy.

Data from the Housing Development Board’s and the Ministry of Manpower’s websites showed that Mah was perhaps being too modest.

MOM’s website showed the annual rate of average earnings in Singapore generally rose by single digits since the last general elections, peaking at 6.2% in 2007. There was negative wage growth of -2.6% in 2009, most likely the result of the global financial turmoil that began late 2008.

Over on HDB’s website, the average annual flat prices since 2006 generally rose by double digits each year, even during the period of global financial turmoil. The only year in which the rate of increase of flat prices was a single digit was  in 2006, when prices increased by 1.8%.

To put things in clearer perspective, from 2006 to 2010, wages increased by 18.8% based on MOM’s data, while housing prices increased 70.2% in the same period based on HDB’s data. That means average housing prices have outpaced average wage growth by almost four times since the previous general elections.

Such figures suggest much more than enhancement of asset value; there is a strong hint of inflation of asset value.

If housing policy is a central plank of the PAP’s long term electoral strategy, then it has to explain why, in the period under its watch since the previous elections, housing prices skyrocketed relative to wages, as well as what the PAP intends to do about the situation. The argument that increase in public housing prices are due to strong economic fundamentals is a tough one to swallow when government data showed that wages had not increased at a similar pace.

Failure to address this issue adequately may, in the upcoming general elections, cost the PAP votes of younger Singaporeans who have either recently bought a flat or are trying to buy one.

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  1. […] Flat prices: enhancement or inflation […]

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