Letter from Chia Hern Keng
refer to “Asset that keeps growing” (Dec 30 TODAYonline)

Mr Mah Bow Tan does not think new Housing and Development Board (HDB) flats are overpriced because 80 per cent of buyers of new flats use their monthly Central Provident Fund (CPF) savings to pay for them. Furthermore, the National Development Minister pointed out that Singaporeans in their old age can cash out their flats to the government to finance their retirement.

I have some concerns:

* CPF savings is a form of social security. Using all of one’s monthly CPF savings for housing assumes that one’s income through the next 30 years or so will be stable. Is this realistic?

* Buying a new HDB flat is not only a major lifetime investment, it is also an essential one. One hopes to pass it down to one’s children. Selling it back to the government would not feature in one’s initial plan unless the future prospect of living in Singapore is really bleak.

* By cashing out, one will suffer a major opportunity cost – selling off a property paid for through a lifetime. It also means one’s children would have to buy a new and far more expensive flat.

Hence it does not solve the basic issue which is that of high prices of new HDB flats. As regards the desirable appreciation of a HDB flat, such asset appreciation is to be expected. But no matter how much the flat has appreciated, in the vast majority of cases, one still needs to live in it, hence the enhanced value would have no significance.

One way to ascertain whether it is overpriced or not is for the HDB to be forthcoming about the real cost of building the flats.

However if for some valid reason, the costing has to be kept confidential, then may I suggest that the government consider introducing competing developers into this public housing sector, granting them the same privileges – like in the allocation of state land at the same pricing.

That would bring about a price-moderating effect in public housing and may even enhance the level of efficiency in this sector.