Singapore: Why owning property is such a big deal

By yahoosingapore – November 29th, 2010

 

By Seah Chiang Nee

SINGAPOREANS were once exhorted to regard the current 30 years as a second marathon of life, in which everyone who completed could win a prize.

“No need to be first, just finish the race and you get a prize,” said the then Senior Minister Lee Kuan Yew after he had stepped down as Prime Minister in 1990.

It was his way of rallying the population behind his successor for a new nation-building battle. And what was the reward? A second property.

His rationale was simple. After the first 30-year marathon well run, he was offering to help give what Singaporeans were hankering for most — a second property — if they gave a repeat performance.

It came from a master politician in his heydays who understood what his people wanted. At the outset of history, the ruling People’s Action Party (PAP) had made subsidised home ownership a top strategy.

A generation later, Lee had noticed that although 87% of Singaporeans already owned public flats, many were still striving to buy a second property, if not here then overseas.

This property craze is not easily understood by people living in countries where land is plentiful and cheap.

His intention was to help citizens achieve their dream of living in one — and renting out another.

Today — nearly 20 years later — the circumstances are very different. Some of the national goals have changed. The main problem: too many people, not enough affordable land.

Lee’s concept of a two-property society is fast fading — the victim of a population expansion programme. Since early the 1990s, more than two million foreigners have flocked here.

The post-Lee government has not only stopped talking about a second property for Singaporeans, but has, in fact, made it much harder to achieve.

In August, it announced restrictions on people buying second homes as part of new measures to cool the residential property market.

In a move to help first-time buyers, who often had to wait for years, it moved against the use of HDB public housing for profit.

It was meant for working Singa­poreans to live in, not to speculate with, the authorities said.

Owners are not allowed to live in one while owning a second private residence for rentals, without residing there for five years.

Meanwhile, another housing trend is worrying Lee: More owners selling their HDB flats for quick profit and becoming tenants.

It is a blow to his 100% home-ownership goal.

On Nov 13, Lee advised HDB flat-owners not to sell them because these were assets that would appreciate in value year after year.

“I urge you not to listen to the estate agents to sell it and go and rent a flat because that’s a stupid thing to do,” he said in a constituency function.

“You sell it, you may not get a rental flat for a long time. And you cannot gain from a rental flat. Please remember that.”

Many youths found the advice baffling, especially those who were not convinced that property represented the best long-term investment on this tiny island.

But for Minister Mentor Lee, the issue is a political and security issue.

Singapore is defended by a people’s army of national service reservists, civilians who serve as front-line troops in case of war.

And to first generation leaders like Lee and the late Deputy Prime Minister Goh Keng Swee, home-ownership had always been a cornerstone of defence.

For people to stay and defend this place, they must have a stake here, Lee rationalised.

National servicemen might not fight as hard if told they were merely defending other people’s wealth or Orchard Road or Shenton Way, but they would defend their own HDB homes with gusto, Lee believed.

My foreign friends sometimes find this preoccupation with properties hard to understand.

An American once told me he was surprised to discover the intensity. “When one of us buys a house, it’s usually for years until he is relocated to another city. Singaporeans seem to be doing it all the time.”

He wasn’t too far off. In recent months whenever a group of people gathered, chances were the subject was real estate.

And many — from housewives to young professionals — consider themselves a bit of an expert.

“The danger comes when people risk their life savings front up,” said a housing agent. That was what MM Lee meant when he said “Don’t sell your HDB flat”.

Industry sources said while some owners were forced to sell because of financial hardship, others were actually treating their public flats as an investment tool.

Convinced that properties in Singapore are over-priced, they cash out to live in rented flats, putting some stress to Lee’s home-ownership society.

“They think they can buy it back a lot cheaper, and are flirting with trouble,” one developer said.

With wages of the average working Singaporean struggling to keep up with living costs over the last decade, one out of every 12 owners are in arrears with his HDB payments.

The government — which wants to accept more immigrants to achieve a 6.5-million population — is playing down the negative impact the “open door” policy is having on Lee’s dream of 100% home ownership

One report said that 60% of grassroots leaders of the ruling PAP recently disagreed with Prime Minister Lee Hsien Loong’s foreigner intake explanation.

With spiralling prices, more young people are complaining their marriage plans are affected.

“While MM Lee is advising us not to sell, I still cannot afford to buy one,” said Willie.

(This was first published in The Star, Malaysia).

A former Reuters correspondent and newpaper editor, Seah is now a free-lance columnist writing on general trends in Singapore. This post first appeared on his blog, www.littlespeck.com on October 23, 2010