If a family lives in a rented home and there is an increase in the rental charge, it results in a higher cost of living.
The purchase price of a home is the discounted value of the future rental. If the purchase price increases, the monthly installment to pay the loan also increases. This is almost the same as paying a higher rental.
If housing prices continue to increase, the owner will benefit as the cost is already fixed at the time of purchase. This was the case in the past, where the cost of property represents a low percentage of the average income, i.e. when housing was inexpensive..
In recent years, the housing prices has increased to a high proportion of the average earnings. It is not possible for housing price to continue to escalate, as the people cannot afford to these prices, when their earnings have stagnated.
The high housing price will be a burden for the future generation. They pay a high price and has to service the loan using a higher proportion of their earnings. The prices will not continue to escalate, after it has passed the "affordability" mark.
It is better to have a system where the housing prices is not left to speculation in the market. The housing prices to be controlled, and kept within a reasonable proportion to the average income. .
Tan Kin Lian
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