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From our Correspondent National Development Minister Mr Mah Bow Tan is confident that the prices of HDB resale flats will continue to rise this year despite hitting a record high last month. HDB resale prices rose 1.4 per cent in the second quarter to a record high. 'The flat prices would probably go up ... by 1 per cent, 2 per cent. It will just keep on going up if the economy recovers as people expect, and if confidence returns but affordability will always be there." Mah said. Despite widespread concerns on the ground that HDB flats are becoming more expensive, the government is adamant that HDB flats remain affordable to ordinary Singaporeans. In a letter published in the Straits Times forum on 31 August 2009, HDB Deputy Director Mr Ignatius Lourdesamy wrote that HDB flats remain affordable to eligible first-time households as they use between 21 to 25 per cent of their monthly income to service their loans on new and resale HDB flats which are well below the international affordability benchmark of 30 per cent. (read letter here) This is the standard answer given by the ministers when asked on the affordability of HDB flats. As public housing, HDB flats should not just be affordable, but easily affordable to all. The international benchmark of 30 per cent should be used only as a guide and not an absolute figure to determine prices of HDB flats.   Though eighty per cent of Singaporeans qualify for housing subsidies and afford the mortage loan, it doesn't take away the fact that they are paying much more than they should for public housing which should be heavily subsidized by the government in the first place. Mah also claimed that the government is subsidizing the cost of the HDB flats and have increased the value of flats already bought by Singaporeans. "We subsidised you when you buy and we increased the value of your flat when you live in it and... facilitate you to monetise it when you grow old. This is the best form of investment and welfare for the people", he added. Mah's views were shared by his colleague, Senior Minister of State for National Development Grace Fu who noted that HDB flats remained affordable to Singaporeans in a reply to question from a MP who asked if a cap should be imposed on rising HDB resale prices during a Parliamentary session in July. She said: "'HDB flat prices should be a reflection of Singaporean's wealth and it is "not a bad idea" for prices to increase steadily, especially for those holding onto negative assets bought in the previous market peak in the mid 1990s.'" However, it is a fallacy that rising HDB flat prices will create wealth for Singaporeans all the time. In fact, as prices go up, the financial liabilities of households will increase and more will be plunge into debts. A study done by two NUS economists, Tilak Abeysinghe and Gu Jiaying, shows that "past episodes of house price escalations have led to a substantial erosion of housing affordability" especially in the private sector. (source: NUS SCAPE) Higher property prices does not necessarily translates into higher wealth for Singaporeans. Higher property prices, instead of creating a wealth effect, exert a significant and negative "price effect" on consumption expenditures leading to a fall in the average propensity to consume. As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans. Singaporeans will be plunged into greater debts with rapid escalating of HDB prices. Those who bought their flats years ago at a reasonable price will be in a slightly better position as they may be able to capitalize on the intrinsic asset value of their flats by selling them. However, they will probably need to fork out a larger sum of money to purchase another property at a much higher price unless they downgrade. For Singaporeans who bought the flats recently, they will be in dire economic straits should the property market crash subsequently as in 1996. Given the record high prices now, it is highly doubtful that the prices of HDB flats will continue to rise due to the economic uncertainties and prospect of higher unemployment rate at the end of the year. Related articles: >> HDB flats will be “severely unaffordable using the Median Multiple as a benchmark for housing affordability”    Read More →

By Shamin Adam from Bloomberg Singapore’s economy this year will probably contract less than economists predicted earlier as manufacturing improves, a central bank survey showed. Gross domestic product may decline 3.6 percent in 2009, according to the median forecast in a quarterly survey of economists by the Monetary Authority of Singapore released today. That compares with a June forecast for a 6.5 percent contraction and the government’s estimate that the economy may shrink 4 percent to 6 percent. Singapore expanded more than initially estimated in the second quarter as manufacturing and global demand improved, helping the nation emerge from its worst recession since independence 44 years ago. Asian countries from China to the Philippines are reporting better economic numbers as more than $2 trillion in stimulus by governments worldwide take effect. The survey shows the “most likely outcome” is for Singapore’s economy to contract by 4 percent to 4.9 percent this year, the central bank said. The $182 billion economy may grow 4.5 percent next year, faster than the 4.2 percent forecast in June, the survey showed. Singapore’s economy will probably shrink 3 percent this quarter from a year earlier, the survey of 21 economists showed. GDP shrank 3.5 percent in the three months ended June 30. Manufacturing will probably plunge 7.1 percent this year, less than the June median estimate of a 14 percent drop, the survey showed. The government has said the recent improvement in drugs and electronics output, which underpinned last quarter’s expansion, may falter and delay the Southeast Asian economy’s recovery. Exports Fall Non-oil domestic exports are expected to fall less than expected, sliding 11.5 percent in 2009, from an earlier forecast for a 14.1 percent decline, the survey showed. The government last month raised its 2009 forecast for exports, predicting overseas shipments may drop between 10 percent and 12 percent, from a previous estimate of as much as 13 percent. Construction will advance 17.3 percent in 2009, the economists estimated. Financial services may contract 3 percent, according to the median estimate. Consumer prices may be unchanged in 2009 after gaining 6.5 percent last year, the survey showed. The central bank expects consumer prices to fall 0.5 percent or climb 0.5 percent. Inflation may average 1.5 percent next year, the survey showed. The Singapore dollar will probably end this year at S$1.44 versus the U.S. currency, compared with a June prediction of S$1.466, the survey showed. It traded at S$1.4455 as of 11:24 a.m. in Singapore today. Singapore should return to a policy of allowing the currency to strengthen once the economy recovers from its recession, the International Monetary Fund said Aug. 31. Singapore’s unemployment rate may reach 3.8 percent at the end of 2009, compared with a June estimate of 4.2 percent, the survey showed. The jobless rate was 3.3 percent in the past two quarters. Source: Bloomberg  Read More →

From our Correspondent According to a report from the Jakarta Post, representatives for the family of the late David Hartanto Widjaja, who was found dead at Singapore’s Nanyang Technological University in March this year, are planning to sue the Singapore Police for refusing to return David’s laptop and police records to his family for examination. (read report here) The Singapore police took David's laptop for forensic examination after his death. A police officer told the coroner's court held in June this year to determine the cause of David's death that he found a "suicide letter" dated January 24 in his laplop expressing his desire to end his life. However, David's family disputed the testimony, claiming that David was with the family on that fateful day. David Widjaja shocked the entire nation by jumping to his death after allegedly stabbing his professor Chan Kup Luk in his back. The police had initially closed the case as "suicide". The coroner's court was called at the family's insistence. They had suspected foul play as David had showed no signs of depression or suicidal tendencies in the weeks leading to the tragedy. Judge Victor Yeoh, who heard David's case said the results of an investigation and evidence presented before the court proved David had committed suicide. “I rejected all the evidence from the victim’s family,” he said without giving an explanation. Despite the verdict, many questions remain unanswered. If David had intended to commit suicide, there is no need to stab his professor before doing so. He could have discovered and used easier methods to end his life. David was playing online games till 3 am the night before which did not quite corroborate with the emotional state of a person attempting suicide. Witnesses at the scene also heard David crying for help when he dashed out of the professor's room. His close friends testified that David was not depressed and neither was he affected by the loss of his scholarship. “The only choice now is to sue the Singapore Police. We want them to return David’s laptop to his family....Such an action would make it difficult to trace police statements in previous trials” Iwan Piliangan, the team chairman, said. David's father still does not believe that his son had committed suicide and had vowed to "go to the ends of the earth to find justice". However with the case now closed, it is not known if there are any legal channels left for David's family to pursue the matter. The unfortunate death of Widjaja had won his family widespread sympathies from the Indonesian public. The team which was set up to help his family investigate the cause of David's death comprises mostly of volunteers like blogger Iwan Piliangan.   Related articles: >> David's family vows to seek justice >> Time for Singapore to answer allegations in Jakarta Post article on David Widjaja  Read More →