Wednesday, January 20, 2010

Impose No Burden

In the New Paper yesterday, I read an article on a meet-the-people session between Law Minister K. Shanmugam and his response to a question on the Singapore government’s immigration policy.

When 58-year-old Wee Kai Fatt, an engineer, stood up and complained about the foreigner-fuelled population boom, saying that the influx of foreigners has caused HDB home prices to skyrocket, the Strait Times said that the Law Minister “took pains” to clarify several misconceptions in Mr Wee's statement.

“The Law Minister's key message: It is unfair to cast foreigners as the villains driving up the prices of HDB flats. Speaking at the end of his three-hour visit to Yew Tee constituency in Hong Kah GRC, he said: 'The first misconception is that somehow there are five million people and that's putting pressure on all of us. It doesn't. 'Of the five million, 3.2 million are citizens and roughly 500,000 are permanent residents (PRs). The remaining 1.3 million are here on temporary work permits and they 'impose no burden' on the public housing system, said Mr Shanmugam, who is also the Second Home Affairs Minister.”

Everyone I had spoken to, Singaporeans and foreigners, laughed at his statement. 1.3 million foreigners in Singapore 'impose no burden' on the public housing system, I mean does Mr Shanmugam really expect anyone to believe that? Where does all these 1.3 million temporary work permits people lived? I know of foreign colleagues (on temporary work permits no less) who live in HBD flats, I know of relatives who rent out their flats to foreigners, I know of foreigners living near my HDB flat. Does Mr Shanmugam really think the prices of HDB flats are not affected by all that?

Even if Mr Shanmugam really think the 1.3 million temporary workers do not affect the prices of HDB flats, what about the 500,000 PRs? Out of a population of 5 million, 1.8 million of them are foreigners. To say that foreign workers do not affect HDB prices and 'impose no burden' on the public housing system is ludicrous.

Hopefully Mr Shanmugam was just tired as he was speaking at the end of his three-hour visit, but a clarification of his statement would be great. At least, it would stop people laughing.

5 comments:

Anonymous said...

It might be possible that temporary workers have a minimal impact on housing prices. Or they could have a huge impact. Several questions would need to asked:

1. Definition and Composition of temporary workers. Who are these temporary workers and why was the need differentiate temporary workers from PRs? Looking at the MOM website and a working paper http://www.ilo.org/public/english/dialogue/sector/papers/construction/wp106.pdf on foreign workers in Singapore, it seems that "temporary workers" refers largely to menial/semiskilled laborers employed on construction and industrial worksites.

2. Housing of Temporary Workers. Where and how are temporary workers housed? Are temporary workers provided with housing allowances and are free to rent their own accomodations? Or are they provided with company housing. If the latter is true, are companies housing their foreign workers in specially constructed (or designated) dormitories or are they renting properties on the open market?

These 2 questions are important is housing prices are ultimately the result of supply and demand in property and rental markets.

An illustration follows:

Assume that temporary workers are largely menial workers (and not popstars in singapore for a concert).

Assume that companies rent properties on the open rental market to house the 1 million plus temporary workers. This obviously places a high upward pressure on rental rates and hence provide property owners with a high rental yield. Prices move up as rental properties become a more valuable source of income. So in this case, we might safely say that the large number of foreign temporary workers have contributed to soaring house prices in Singapore.

On the other hand, if companies are housing their workers in specially designated worker dormitories, and not competing in the rental market, then the effect on rental rates might be negligible. I.e. 1 million foreign workers have little to no impact on property prices.

I seem to be inclined to think that the latter is true.

I think the causes of rising housing prices might have more to do with either PRs, new citizens, or funds flowing out of financial products into housing. That would be an interesting thesis. :)

Ghost said...

There's not that many designated worker dormitories for foreign workers, without question there's not enought for 1.3 million workers. Most companies rent flats for their workers to stay in. The foreign workers near my flat are construction workers and to say the foreign workers do not affect HDB prices is unbelievable.

Anonymous said...

This SHAM either acting blur or does not understand the law of demand and supply. When you have such a huge number (more than a million) affecting the population for housing, it definitely increase demand, and driving up the price since the supply is limited and could not fulfill the demand.

How can someone without the knowledge of demand and supply like SHAM and Marlboro Tan ever become a ministers ? Only in SinCity, inept and incompetent fool can become MIW in the image of the old fart as long as it drive up profitability for Singapore INC with ownership of Lee Imperial Family.

Anonymous said...

Hey, 500k-800k for a HDB flat is still affordable (as MM said) - provided you got plenty of money to spare, or maybe take up a 35 years loan...

Ghost said...

Don't laugh man, the way things are going, 500k-800k for a HDB flat might actually happen