Tan Kin Lian's Blog: Lower cost of living

Friday, September 04, 2009

Lower cost of living - the good old days

30 years ago, Singapore had a good economic model, based on a lower cost of living. The price of HDB flats were affordable (at 10% of today's prices). The HDB shops and stalls were rented at inexpensive rates. It was possible for the merchants and stall holders to offer their products and food at affordable prices. The cost of living was low.

80% of the population lived in HDB estates and were able to get by on modest wages. There was less stress. People who proud to be Singaporeans and to enjoy a good quality of life.

This economic model changed after 1985. Under the "asset enhancement" strategy, the prices of property was allowed to inflate to high levels. This was supposed to create more wealth. It produced the opposite and negative effect and enslaved the future generation to a high cost of living and high debts. Life was stressful. The sever decline in birth rates occurred during these past two decades.

There is still the chance for us to get back to the good old days. But we need to have leaders that think a different way.

Tan Kin Lian

22 comments:

Anonymous said...: Yes, the earning we have now is seems similar to what we earned 15-20 years ago but the price of property and HDB flats now are 2-3 times higher. How can our younger generation afford to buy? I think our next generation will all be the "slave" of HDB for life....we may not even clear our debt when we die....
I wonder why the government push up the HDB prices and force us to work harder "for life"? ....Ha! we know why..; September 04, 2009 6:07 PM
Anonymous said...: no house, no babies. but doesn't matter, can import more FT/FWs. it is perfectly ok to let heartlanders to go through the Darwin's theory. anyway, it's a fight-or-die as nature ain't it? singapore has no natural resource to rely on for laziness, that alone speaks.; September 04, 2009 6:08 PM
Anonymous said...: A number graduates who started work in the early 1980s are now jobless (or w/o proper jobs). Some of them have been in this state for a few years now.
Just imagine, if not for the savings they have accumulated during the "good years" when the cost of living was low, how are they going to survive now?

If this happen to the younger generations, how are they going to survive?
For the sake of younger generation, you have to be responsible, and help them to think/plan for the future. Esp. when there are so many FTs around to compete with them, and the cost of living is so high now.; September 04, 2009 6:46 PM
Anonymous said...: Frankly I dare not even think about the next generation. The cost of living has overtaken wage increases over the years--houses,infant powder,education,daily necessities and even hawker food.How on earth are our children going to save ?; September 04, 2009 8:21 PM
Anonymous said...: The asset enhancement strategy had a very severe side effect that had really made us stagnant for the last 20 years. The value generated was not of true value but of an artificial nature, it's more like an ponzi scheme now the last to hold on to the dept would loose.

It's ironic that we are throwing all our money into the often touted limited resource, land/property. This is devastating as we were not able to have technological/human/social advancements due to the scarcity of liquid capital, now all of which have been locked into the ever limited number of properties.

This country is now effectively a self imploding market, whatever GDP benefits channelled to the citizens is being put into the ever limited and high cost properties, all waiting for the next generation/FT/PR to buy the properties at an even higher price.

Personally I've given up talking to most of my peers as I'm usually laughed off as an idealist. Who in the right mind wouldn't want to make money the 'easy' way....; September 04, 2009 8:29 PM
Anonymous said...: Hi Mr Tan,

As a counter point to my previous comment at 8:29PM, I do see some encouraging developments going on in Singapore, so all is not lost yet.

Readers please have a look at http://sgentrepreneurs.com to see some the younger generations trying to create value. :) I'm in no way affliated to them just to show and hopefully be able to inspire some readers to take charge of their life and create something out of nothing, the sky's the limit.; September 04, 2009 8:45 PM
Anonymous said...: Last time there was a tacit understanding that everyone who wish to work will have a job to do.
In the 80s, and even in the early 90s, many people would tell you no one would ever starve in spore. As long as you are willing to work, you can easily find a job and survive. And that was true at that time.
But not now. Now even a phd from a renowned uni have to drive taxi, after a futile job search of one year, and during the "golden period" of spore (2008) when the econony was booming.
Many older people have been jobless for many years (yet they survive). This is something which you can't imagine last time.
Now even have people die after eating left over food dumped as rubbish.
There is no job security now, yet the prices of food, housing, .... keep rising. Really stressful. Can you imagine what is it like to be jobless?; September 04, 2009 9:12 PM
Tan Kin Lian said...: Hi, nobody seems to want to focus on the question, "how do we get back to the good old days?"; September 04, 2009 9:24 PM
xl said...: How to get back to good old days? We need a shift in mindset from growth at all costs cause now the growth is more like cancer growth (mutated cells killing off other good cells)

Few months back government tendered out market cum hawker centre at Sengkang. Highest bidder is from Kopitiam company. If not mistaken, amount is twice that of 2nd highest. I pity residents of Sengkang cause high rent->higher costs of goods. Hawker centers under NEA model is abandoned in view of privatisation.

I myself have boycott kopitiam (is now a monster). Have suggested my friend living in Sengkang to boycott too.

At times is sad to walk around & the shops are 50% (half a shop). Rents have become ridiculous.; September 04, 2009 9:50 PM
Anonymous said...: "Asset enhancement" indeed created more wealth, especially for the landlord.

Especially so, since affordability is defined as 30% of income.; September 04, 2009 10:00 PM
Anonymous said...: "the good old days" are gone.
Replaced by
"work till 62 .... 65 ... 67 ... "
"work till you cannot work (nice way of saying till you die) "
"enjoy the dignity of employment in your golden years"

It's like saying how do we get back the good old days of DOS or Lotus 1-2-3.

Let the past remain in the past.
See the future and shape the future.; September 04, 2009 10:06 PM
Anonymous said...: Is it possible to go back to the "good old days" ? If property prices go back to the what they were 10 years ago, how many Singaporean home owners will be bankrupt ?; September 04, 2009 10:29 PM
Tan Kin Lian said...: Yes, it is possible to implement the policies of the good old days. HDB flats were offered at very low prices, but are subject to restrictions on sale and levy on gains.

The HDB flats should not be an instrument for financial speculation and asset gains. It should be kept at controlled prices.

The young people have a choice to stay in HDB flats at controlled prices, which are more affordable, or to pay a higher price for market properties.

I would advice people to treat a HDB flat as a place to stay, and to keep the expenses low, rather than as an investment. If you want the property to appreciate, you will have to pay a higher price for the next property anyway, and be a slave to the big property tycoons.; September 04, 2009 10:49 PM
Anonymous said...: Hi Mr Tan,

Haven't given much thoughts but ideas that I have in mind would be:
1. Most directly increase the amount of subsidy for first time buyers.

2. Have a point based system for NSmen where they can use the points for purchasing the flats/medical/education. The points would be accumulated when they serve NS and reservist. e.g. 30,000 points == $30,000 when purchasing flat. It allows the govt to save face and let the prices lower down and at the same time really make NS men's time compensated. When they sell the flat though the price would have be less the subsidy....(but this might depress the prices, anyway just a wild idea)

Sorry if my suggestions are stupid and take up your time. I apologize in advance.; September 05, 2009 1:28 AM
JamesNeo said...: HDB flat cannot possile be an investment because the price of the flats cannot rise indefintely. it will implode when the price become much greater than 30% of their salary. The salary of middle clsss citizens are not likely to increase much based on the "free market model" because of the tendency of exploitation by the employers.

Demand now are driven by PRs and spill over effects from people speculating in the private property. However, such demand is likely to subside as the economy is likely to be in a prolonged drought and will the high living cost of singapore which is lijely to get worse in the next decade if we proceed with the growth at all cost model

The PAP do not dare to let the HDB prices drop because of the middle generations vote but inevitably this bubble will implode within the next decade.There are a few choices the pap can do. one: encourage or enforce employers to increase salary keeping pace with the increase in HDB prices
Second increase subsidies with HDB price
third Decrease the prices of new flats( by selling flats with little profit) to cool down the resale market to make sure the price is really based on demand; September 05, 2009 1:31 AM
Anonymous said...: As I see it, this problem is created by our own gahmen with their asset enhancement idea. This idea was aimed at garnering votes for the PAP by giving us the impression that we are "rich" and "well off" compared to citizens in other countries and all this was the result of the work of the PAP They now realise that this economic bubble cannot continue much longer and they know that they cannot solve this problem and it is only a matter of time before the problem backfires on them and soon the PAP will be booted out. The MM realises this and that is why he recently mentioned that he see that the PAP will stay in power for another one or two terms. If the PAP are booted out and the economy starts to suffer the effects of their (PAP) bad policies in the past, they will blame the new gahmen for being incompetent. Very cunning?; September 05, 2009 11:03 AM
Anonymous said...: Well, what can i say.
The government has always said that public housing would be kept "affordable", wonder how they calculate affordable.

Consider this, a 20 year old 4 room HDB rents for S$1,500/month & sells for S$350,000. To simplify calculations, we ignore compounding. So 79 x 12 x 1,500 = $1.42mil would be the theoretical ceiling...still a million dollars upside to go !!!!; September 05, 2009 9:07 PM
Anonymous said...: Hello REX comments as follows,
Don't be ridiculous, or sentimental, Mr Tan. We can't go back in time to the good old days. The reason is very simple. For every person that suffer in the new era, there is also one (or more) who gains. For example you complain that you kopi costs $1.20 now. But the kopitiam owner will be happy to collect more to pay his rent. Then you complain, your rent is 10% higher. But the landlord is happy because he gets more profits. So if you want to go back to the good old days, the reverse logic holds, and you will have people resisting (not unreasonably) the change you intend to create!!!!!!
This cyclic principle in fact is so entrenched not just in the local economy but the economy of the whole world. Therefore you just cannot break the machinery which will continue onwards. At best you just hope that the machinery wouldn't run so fast but you cannot reverse it, surely.
REX; September 06, 2009 9:12 AM
Tan Kin Lian said...: hi rex
You can give your opinion without insulting other people's opinion. Be polite, even if you disagree. Your fist sentence is unnecessary. If you leave it out, you can still put your point across.; September 06, 2009 9:25 AM
Tan Kin Lian said...: I agree with REX that it will be difficult to adjust the rental of shops. But it is possible to offer HDB residential flats at lower price, and subject to restrictions on resale.

It is also possible to offer rental of HDB flats at more affordable prices, and not pegged to market.

This will reduce the demand for residential property and will stop its further escalation. Over time, the property prices will come to a more reasonable level, compared to wages.; September 06, 2009 9:32 AM
Anonymous said...: Unfortunately what you described is a global phenomenon due to globalization; markets are open, jobs are competitive on an international level - everyting is "outsourced". A term that was almost unheard of 30 years ago.

Years ago I never knew what all those protests against globalization were all about. Looking at how the world has "progressed" over the last 30 years, now I know. Globalization has benefited the few people at the top at the expense of the middle class in most developed nations.

Singapore is an extreme example due to the influx of workers coming into country. Furthermore the hike in property prices was no accident; Tax levies for rich foreign property buyers were removed; foreigners were encouraged by your dear leaders to buy, thus reducing the supply of property, increasing the demand accordingly. In the meanwhile your dear leaders were intentionally slow to open up new properties for development to keep the prices high. Finally, with the controlled media they hyped things up as much as they could, which served to hike prices up even more.

So who gained? The rich. The elites. Who payed? Well just about all the rest of us which is at least 85% of the population. And to add insult to injury, a great portion of the accumilated wealth your gamen acquired thru property increase was squandered away by Ho Ching last year (50bn REPORTED losses). I'm just amazed that you guys are not up in arms plotting an armed rebellion.

So now on to the main question; How to deal with prices spiraling out of control? Lets start with dealing with the property price; Get rid of this system where the gahmen has monopoly over the supply of land. To do this you need to vote for the opposition.

A lot of people on internet forums and in this blog keep complaining about how hard life is but they still vote PAP because they have "proven leadership" abilities. This is a typical Singaporean mindset and is quite pathetic frankly. Until you learn to vote for the opposition in mass and stand up for yourselves, you will never have my sympathy.; September 07, 2009 10:27 AM
Anonymous said...: Often, we hear our parents talking about the good old days. If only I was born at least 20yrs earlier. I'll probably be able to enjoy my life better than now. LKY is so confident that PAP will win the next 2 elections. Do you think the govt will want to make any changes that will jeopardize themselves since they are going to win anyway?; September 07, 2009 12:52 PM

Friday, September 04, 2009

Lower cost of living - the good old days

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