Esoteric Practice

In the Straits Times report titled "More than 75pc can afford flats at new prices ( http://img211.imageshack.us/img211/3586/hdb1981breakdown.jpg )", dated May 25, 1981, Mr Teh Cheang Wan, the then-Minister in-charge of Housing reveals a breakdown of the government's costs of building flats. A chart attached to the report shows the breakdown of the average costs of building 3-room Model 'A' Flat. It reveals data such as the Nett Area (m2), the Construction Cost, the Land Cost, the Total Cost, the Selling Price and the Subsidy for each flat built. A 75 m2, 3-room flat located in New Town back then had a Selling Price of around $32k, whereas the Total Cost to build it was around $61k. A subsidy of around $29k was granted for each. Thus, each flat was sold at around half the total costs.


According to the official website of THE PEAK @ TOA PAYOH (http://www.thepeakattpy.com/ ), " THE PEAK @ TOA PAYOH is a public housing development under Design, Build and Sell Scheme (DBSS) located close to the heart of Toa Payoh Town Centre." This "public housing development" sells a 70 m2, 3-room flat for the published price range of "From S$ 355,000". Hence, 30 years since Mr Teh sold a 3-room flat at around $32K, a "public housing development" flat slightly smaller in size is sold at more than 10 times (1000%) the old price.
While it would be good news if the same flat Mr Teh had sold for $32k has appreciated in value to $355k (around 12 folds) it would be another thing should the construction cost of flats in Singapore have escalated at such a rate--around 12 folds. At the rate of 1,200%, it would mean that it costs $732k to build a flat that cost $61k to do so in 1981. It would mean that our government would need to grant each buyer of a 3-room flat in The Peak @ Toa Payoh a subsidy of $377k (the difference between the assumed selling price and the cost). At this rate of subsidy, our Budget may be severely strained.


As such, I suggest that the government do the same today as what Mr Teh did: reveal the costs. Should the total costs have escalated so much to warrant the selling price level to be set at around 12 times that for 1981, it is only fair for each buyer to share the high costs by paying significantly more than $355k for each flat. This is necessary to ensure that our nation does not run into deficit in the long term. Regrettably, the incumbent Minister for Housing has not revealed the costs for many years.

During the past 30 years since the above-quoted report was published, the Singapore government takes pride in the nation's drastic economic progress in terms of GDP and foreign reserve growths. Today, thanks to such world-leading success, each minister is rewarded with a world-leading compensation package that surpasses the sum of that of their counterparts in the United States, the United Kingdom, Switzerland and Australia. The nation's foreign reserve ranks among the top 10 in the world. Naturally, one question an ordinary citizen would have is: Has the Subsidies to Total Costs ratio increased as quickly as these enviable indicators had? If it has, then the above assumed total costs of each The Peak @ Toapayoh flat of $732k might have been too conservative.

Could it have cost a million dollars to build each flat today? Unfortunately, since the present minister has not revealed the data, ordinary citizens are unable to know how far this ratio has increased over the years, and how much they should thank the Minister for the subsidies he is granting to flat buyers today.