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Before the expectations bubble bursts ...
#1
Before the expectations bubble bursts ...
We need to return housing policy to the fundamentals of home ownership and affordability

In a flurry of announcements since he assumed office on May 28, National Development Minister Khaw Boon Wan has demonstrated urgent resolve to deal with housing concerns ranging from high prices to out-dated eligibility requirements and the inadequate supply of new Housing and Development Board (HDB) flats.

Housing was a hot topic during the General Election last month. The prevalent view then was that public housing had become less affordable and that private property was increasingly out of reach of HDB upgraders. Housing became the prism by which some Singaporeans saw the Government as having lost touch with the people's basic concerns and aspirations.

Dealing with housing supply-side issues is vital. Ramping up the supply of new flats is crucial. But it is equally important to address demand concerns. Yet, this is not merely about curbing or tweaking demand - the Government will have to adroitly manage expectations, as well as re-orientate the fundamentals of our housing policy.

Singaporeans have come to regard affordable housing as an integral part of the social compact. Affordable housing is seen as an entitlement - a birthright, effectively.

Indeed, the typical Singaporean does not just think of real estate; it is also what he thinks with. Marriage and childbearing decisions often hinge on the prerequisite of a couple having their own home. Further, residential property is easily the largest asset owned by Singaporeans.

As residential property constitutes one of the largest financial assets in our economy, whatever happens in the property markets impacts upon our financial, social and political behaviour, social stability, and the larger economy. With 85 per cent of Singaporeans living in HDB flats, public housing prices intimately affect the private sector property market. Hence, in reviewing the housing policy, the Government will have to be cognisant of the interests of both existing home-owners and prospective ones.



A HUNGER FOR QUICK PROFITS

The basis of home ownership in our society has evolved since the HDB was established in 1960. From the outset, public housing was not merely about roofs over our heads. For a fledgling nation-state, universal home ownership was, and remains, critical in forging a sense of rootedness and nationhood.

Since the mid-1980s, however, public housing was treated as "assets". The humble HDB flat was no longer a mere abode but had become a tradable commodity whose value can be grown and, if need be, monetised.

HDB upgrading programmes reinforced this wealth-enhancement mindset. Property booms in land-scarce Singapore have made home-asset enhancement a wealth-seeking imperative for owners of public and private housing.

Such commoditisation has generated an insatiable appetite for homes to be a means by which quick profits can be churned. In turn, this has created a divide between the housing "haves" and the "have-nots".

In addition, condominium living (or private housing) is immortalised as one of the 5Cs (the others being cash, car, credit card, and country club membership). This desire to move up the housing value chain, combined with the abiding fear of being priced out of one's dream home (and/or investment), have contributed to property speculation and panic buying.

Being a home-owner is now necessary, but still patently insufficient, for the realisation of a middle-income Singapore Dream.



THE EXPECTATIONS TRAP

Compounded by a deep sense of entitlement of a new HDB flat or affordable housing for first-time home owners, this overriding emphasis on the home as a tradable asset has given rise to a spiral of ever-growing expectations among different stakeholders.

Further, the anxious self-interest in enhancing the value of one's home is increasingly at odds with what is fair and sustainable in the long run.

For instance, prospective home-owners expect the Government to provide affordable and quality public housing. Existing home-owners expect, and almost depend on, the Government to ensure their properties have healthy increases in equity value. This obsession with growing real estate equity has resulted in an "expectations trap".

The reality is, the Government will find it increasingly difficult to cope with and cater to this surge in ever-growing expectations. Economic prosperity is not preordained, especially since our economy is so heavily influenced by external economic forces. This perceived "performance gap" on the part of the Government is made worse by property prices being out of sync with the macro-economic fundamentals. What happens when the expectations bubble deflates or, worse, bursts?

Further, many prospective home-owners born after independence only know of a prosperous Singapore. Their housing expectations are invariably higher than their parents. What happens when their dream homes do not materialise?



RECALIBRATION NEEDED

With property as a status symbol, the fundamentals of housing a nation are significantly out of step amid a creeping culture of ostentatious materialism and affluent consumerism.

It is high time expectations of Singaporeans are recalibrated. We need to return to the raison d'etre of our housing policy for the masses: Home ownership as stakeholdership. Related to that is the need to underscore the importance of affordable housing. Together, they are necessary to sustain Singapore's social compact.

Even if the expectations trap or performance gap does not materialise, we need to be mindful of the "treadmill effect" in which the marginal utility of apparent increased wealth from real estate declines. Notwithstanding the rise in absolute value in home equity across all residential properties, the relative wealth positions for most Singaporeans remain unchanged.

In short, a Singaporean may feel richer because of the rise in property values. But that is a mere paper gain. Realising that paper gain throws up the reality that a similar property cannot be bought at the same price. This only feeds into the cycle of anxiety. This means housing will persist as a hot-button political issue and generate significant angst.

Clearly, at the national level, housing-related interests may not just compete but may conflict. As such, a recalibration of our basic housing aspirations is urgently needed. The Government itself needs a fundamental re-think of its housing policy. Can we right-size our housing aspirations and reconcile the different needs and expectations among different stakeholders?

Eugene K B Tan is assistant professor of law at the School of Law, Singapore Management University.

Thanks with Courtesy to Source: http://www.todayonline.com/Singapore/EDC110613-0000006/Before-the-expectations-bubble-bursts-
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