PAP government created HDB asset bubble but still sitting on ‘time bomb’

The PAP government has created the mother of all property bubbles by pouring billions in CPF retirement savings into HDB flats.

Through SERS, the majority of HDB lessees became convinced that every old flat will be returned to the government in exchange for a new flat in a choice location. The PAP was aware of this perception on the ground but so long as our ‘assets’ were being enhanced, they allowed HDB lessees to party on.

To support bubbly prices, LKY, Lau Goh and PM Lee had resorted to asset enhancement propaganda.

PAP’s hand in the ‘asset enhancement’ scam cannot be more evident – as housing prices headed into the stratosphere, billions in tax dollars were thrown at increasing CPF grants to prevent an inevitable collapse.

While HDB flats were relatively new, PAP was happy to be the biggest developer, banker and estate manager. It dictated everything from who gets what contract to conveniently pegging public housing mortgage rate to a fraction above the CPF interest rate. And of course it hired its own kaki as estate managers (EM Services and CPG Facilities Management are both PAP-affiliated companies).

PAP may have belatedly realized that the party has gone on for too long as an awful lot of flats are hitting ‘pioneer generation’ status sooner than expected.

Recently, MND Minister Lawrence Wong and MSM have advised buyers to go for resale flats between 10 and 20 years old as they could be monetized. But what about the majority of older flats?

By 2035, almost 1 million flats will be at least 20 years old and 854,000 flats 30 years old. Since it’s hard to monetize such ‘elderly’ flats in future, what will happen to their value? Will the value of HDB flats continue to defy gravity when Lau Goh’s ‘asset enhancement’ is as good as dead?

By 2035, there will be more than 600,000 flats above 40 years old. Since demand for old flats will soon fall off the cliff after MND Lawrence Wong advised buyers not to anyhow assume all flats will be SERSed, will HDB flat prices collapse?

Without PAP constantly propping up prices of HDB flats, private property will be out of reach to HDB upgraders. With low demand of old resale flats trickling down the entire public housing market, will this not eventually lead to a collapse in the Singapore property market?

The clock has been ticking and HDB lessees don’t need any more “HDB flats a good store of value” lecture.

PAP created the mother of all property bubbles and it had better not continue sitting on a ‘time bomb’.

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2 Responses to PAP government created HDB asset bubble but still sitting on ‘time bomb’

  1. Sinkie says:

    Too late for any easy solution now. PAPies have opened Pandora’s Box & created a monster in the late-1980s. Either Singapore continues as Wong has said i.e. 96% of HDB flats go to Zero, or Singapore embarks on QE to do mass-scale SERS and/or change laws to provide subsidized lease extension packages.

    1st scenario is “You die your biz” and will have tens of thousands of people facing homelessness. Many other families after losing their HDB flats will only be able to afford to rent single bedrooms to squeeze their entire families in. It will be worse than the 1960s when families at least could squeeze into a whole 1-room flat. As Singapore approaches 2065, you will see vertical slums being created as displaced families start renting bedrooms in other older HDB estates to save costs. Or squatting & camping in parks, nature reserves & under bridges and MRT tracks. It will be a housing disaster similar to the 1940s & 1950s, but much worse due to lack of open rural lands & overcrowding. In this scenario it is very likely PAP will be overthrown quite early on — but successive govts will face similar fates if they don’t have “super leadership”, and Singapore will face upheavals with new govts coming & going.

    PAPies are well aware of the above, and therefore the 2nd scenario will most likely be followed:-
    QE for SERS and extension of HDB leases or conversion to renting. This will result in using up of hundreds of billions of our national reserves. The HDB market will be totally revamped and most likely no more secondary resale market allowed. This step is necessary to create a crash in HDB prices in order to lower the amount of spending required for SERS & lease extensions. There would be much more emphasis on renting instead of “buying”. HDB will go back to operating very similar to Singapore Investment Trust (SIT) and early-HDB in the 1940s & 1950s & early 1960s. I.E. same approach as public housing in other countries. Many HDB “owners” would be wiped out as resale becomes illegal. Those who buy high will be hit hard. This scenario will still be tough for many individual families, but for the country as a whole still much better to manage than the 1st scenario.

    What about private properties? Well, for both scenarios, private properties will also be hard hit as HDB people won’t be able to afford upgrading. But I think majority of private property owners are smart enough to get out or cut loss before things deteriorate too much. At the end of the day, property prices will sink to a low enough level & stabilise there.

  2. Disappointed says:

    I can’t believe you’re expecting the PAP to plan so many years ahead.
    It certainly didn’t with hospitals, trains, homes, schools, to name a few.

    What is curious is, if its increasing the population, does it expect only
    childless adults? Adults who will not have children later either?

    How too will the merged schools cope with all the extra students to be
    taken in? Do they really have the capacity? And what happened to
    the plan for smaller class sizes?

    The tremendous amount of building and rebuilding means a lot of
    wastage of building materials. Will we always be able to get all the
    “ingredients” needed for building and rebuilding? What if we can’t?

    How will the constant changes in landscape help build the sense of
    home, closeness and familiarity? The best way to cope with so much
    constant change is to generally divorce one’s self from reality, to be
    emotionless. So we should all become zombies/robots? Uncaring people,
    with no roots and feelings? Is this mindless state good for any country?

    The govt does not seem to have considered any of this — going by past
    and current performance. There is too much firing in the dark.

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