As for if it is a problem of cooling measure of economic failure, I would say it's probably neither, but it's the social phenomenon in modern societies - we technically see it in most asset classes like stocks and bonds too.
HDB Problem:
The older generation (those with HDBs) or any sellers would love the prices to be high so that they can sell it for a profit and have a comfortable retirement egg nest.
The younger generation (those buying BTOs and resale) or any buyers would love the prices to be low so that they don't have to pay as much for a home (lower debt burden).
It's a struggle (or tug-a-war) between people of different generations and it is tough to say which side should get more help.
Help the Buyers of Houses?:
Sell BTO at the cost of construction to buyers
Buyers can buy cheaper BTO flats.
After the 5 years minimum occupancy period (MOP), these buyers can sell their flats in the resale market.
That will probably result in a drop in HDB resale prices on a whole (you as a buyer would not pay a huge premium for a resale flat if you knew it was sold initially at cost price).
The result is people who previously bought a flat before the drop in resale prices (ex-buyers who bought at a high price) will now be underwater (loan amount > HDB value).
It is also possible that these ex-buyers are retirees relying on their flats for retirement income, and suddenly the drop in the value of their flats might affect their ability to retire.
Qn: Do you want to give subsidies to those homeowners who are underwater to compensate them on their losses?
Let us know in the comments below.
Help the Sellers of Houses?:
Sell BTO at marked-to-market prices to buyers
Buyers buy more expensive flats.
Initial buyers are given subsidies to afford the high cost of homeownership.
After the 5 years MOP, these buyers can sell their flats in the resale market.
Flat prices in the resale market will probably remain high.
Sellers can sell at even higher prices in the resale market.
Qn: Do you want to give subsidies to the new home buyers to help them afford their first home and make homeownership a reality for them?
Let us know in the comments below.
Our View:
Housing is a sensitive issue that requires delicate handling and balancing of the interest of both the buyers and sellers.
We think the Singapore Government did manage to solve this pretty well with all the grants being given out to the younger generation to ensure they can buy a home.
It is more important to ensure that homes in Singapore are kept at a fair value so that it does not disadvantage the older or younger generation too much.
So some form of cooling measures and some form of grants would be needed.
That's not to say that what we have now is perfect - there is always room for improvements.
What are some improvements can you think of?
Let us know in the comments below 😉.
Also, because of the need to balance between buyers and sellers, we think that HDBs are not really a great investment - because the Singapore Government has to keep it at a fair value, which means there is kind of a "cap" on how high prices can go.
That is also why we prefer stocks over HDBs, as we had previously written in an article.
Link here: 3 Reasons Stocks are Better than 99 Year HDB
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Recommended Read: CPF LIFE in the Year 2020
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