Kee Chiu's half-truths on housing issues

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For the government, balance is also a matter of weighing the economic and political costs of each decision. Even then, policies remain at the mercy of the market's vagaries.

Public housing policy changes over the last 15 years illustrate this, Mr Chan says. At the peak of mounting demand back in 1995, there were 100,000 people in the queue for flats. This led to accelerated building. But then, the Asian financial crisis of 1997 sent the market crashing. "We had half a Sengkang town empty. There was a surplus of 10,000 units. There is an economic cost to holding 10,000 units empty," he points out.

The government switched to a build-to-order system, which worked well for the greater part of the last decade. Then, the global financial crisis hit in 2008. This time, instead of crashing as anticipated, the housing market flipped upwards on the back of low interest rates and capital inflows because Singapore stayed relatively resilient. Demand far outstripped supply again.

It was not the result of miscalculation, Mr Chan says. "Every year, we only have 36,000 babies. One third of them never get married. Two thirds of them get married, that's 24,000 or 12,000 couples. We bring in 5,000 to 6,000 families as PRs. The innate demand, assuming no one dies, no one sells flats, is 17,000 to 18,000. We build 25,000 a year." But this was not enough because with the rising market, anxious buyers brought forward demand.

"Of course, we're going to spend much more, and we're building at breakneck speed to meet the (infrastructure) demand, but will we suddenly, in five years' time, look back and realise we've overdone it? If the cycle just turns, like in 1997, we do run the risk.

"An empty Sengkang has no political cost but it's a huge economic burden. If the government is not very disciplined and is very worried about political cost, then like some other countries, you will pay the economic cost."

For instance, even as the government is resolutely curbing foreign worker inflows, both to ease the strains on infrastructure, social space and to boost productivity growth, Mr Chan worries about going too far. "If we over-calibrate, we would flip the market and if we go on a roller-coaster dive again, suddenly, all the graduates coming out of the universities and polytechnics may not have jobs. That is the scary part."

After all, one reason why the resident population grew rapidly in the past decade was that businesses were crying out for more manpower. And that came when the post-SARS economy in 2004 was still fragile and could have gone into a tailspin.

"To be frank, a bit of the crowdedness we can still manage. It is a problem to manage, but the other problem is just as scary."

BT INTERVIEW


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