Sunday, March 30, 2014

Challenge of reducing rentals

A key strategy to reduce the cost of living and cost of doing business is to reduce rental. 

The government is the largest owner of land in Singapore. They face a dilemma in reducing rental as it reduces their revenue from rentals that they collect and also from the sale of land. If they reduce the price of land, they will suffer a drop of revenue. If they continue the current high property prices, it will bring a heavy burden to the economy and to the strain on the people.

Even if the government decides to reduce property prices, they can only control the prices of property that they own. They cannot control the prices of private properties and the rentals. The private owners will have to decide on their own.

If property prices fall due to government action, it will eventually bring down the prices in the private sector and will give financial stress to the banking system that provided the loan to the private developers. It will also harm the economy.

There is no clear solution to this conundrum. Japan suffered for two decades. America is also suffering the effect of the bursting of the bubble. China and Singapore will have to follow.

The solution to this challenge will need people with courage and vision. I don't think we have these people in Singapore. So, we will have to follow the fate of Japan.

1 comment:

yujuan said...

Singapore's bubble won't burst as long as China has'nt.
Some Singaporeans may have realise now the China card affects our fate, much more than we want to admit, with our GLCs and Temasek Holdings' investments in the Mainland China and HK, and our dependence on China to absorb our exports, once China bubble bursts in a big way, PAP's political survival is at stake, and the stakes are high.
That may be the motive to transform Singapore hastily to a Global City, to mitigate the shattering effect of a China bubble burst on our Economy, which our Govt is fully aware, and there is no time to waste, but this would leave lesser footed citizens in the lurch, unable to catch up and bewildered and lost in our own birth place.
Present employees of MNC MicroElectronics were shocked to find half of their colleagues retrenched after the CNY's holidays, feeling demoralized and bewildered. Globalization is a cold hearted and ruthless Monster.

Blog Archive