Hong Kong, Singapore and how elections affect home ownership and prices.
There is nothing like an election to focus the minds of the political elite on what matters to ordinary citizens. Singapore may not be a liberal democracy but it is an electoral democracy. That means its political leaders have to face voters every four to five years, and win their support.
In my mind, there is no doubt that elections are why Singapore's leaders have done a far better job than Hong Kong's in reining in housing prices. Hong Kong's Chief Executive Carrie Lam, who was not democratically elected but appointed by the government in Beijing, is now belatedly trying to fix a dire housing shortage that has dogged the city for years. But only after four months of protests that have spiralled into violence and destruction of property.
HOUSING FACTS: HONG KONG, SINGAPORE
In this tale of two cities, consider their similarities. Singapore is a city state with a total population of 5.7 million people and land area of just over 720 sq km. Hong Kong is a city and special administrative region of China, with a total population of 7.5 million people and land area of just over 1,100 sq km.
Consider also their differences. Among Singapore's resident population of four million, the home ownership rate is 91 per cent. Hong Kong's home ownership rate is far lower, at 50 per cent.
As for housing affordability, let's look at the results of a survey by Demographia International. Its survey of eight countries found that the most affordable major housing markets in 2018 were in the United States, followed by Canada and Singapore.
Again, Hong Kong is the least affordable, with a Median Multiple of 20.9, up from 19.4," the writers of the Demographia report said. That means in Hong Kong, the median house price is 20.9 times the median household income. By comparison, the median house price in Singapore is 4.6 times the median household income.
ELECTIONS AND HOUSE PRICES
According to one report by Reuters news agency, housing prices in Hong Kong shot up by over 200 per cent in the past decade, driven by limited housing supply and large capital flows from mainland Chinese buyers. That has angered many residents who cannot afford to get on the property ladder.
Near one protest site, this graffiti reads: "7K for a house like a cell and you really think we (are) out here scared of jail." By some accounts, HK$7,000 (S$1,200) is the monthly rent for a tiny room in a shared apartment.
Singapore's housing prices have also shot up in the last decade but regular polls serve as a useful check on their rise. Eight in 10 Singaporeans live in public housing or HDB flats. These are bought directly from the Government but can be resold in the open market after the owners have lived in them for a stipulated minimum number of years.
In 2011, HDB resale prices rose a staggering 10.7 per cent, due in part to a failure of the Government's building programme to keep up with demand. That year, a General Election was held and voters handed the ruling People's Action Party(PAP) its lowest vote share since Singapore's Independence in 1965. What was perhaps worse for a party more used to dominance than defeat, was voters' ejection of a valued Cabinet minister and his team from Parliament.
A new Minister for National Development, Mr Khaw Boon Wan, was appointed shortly after the May polls. He moved quickly to delink prices of new government flats from those up for resale on the open market. He raised public housing subsidies to keep home ownership within reach for more young couples.
He also raised the income ceiling so more people could apply to buy subsidised government flats - the first such increase in 17 years. Since then, the income ceiling for public housing has been raised more regularly, as have subsidies for first-time home buyers and lower-income buyers.
PRIVATE LAND, PUBLIC GOOD
The Hong Kong government has far less control over the housing market than Singapore's. To understand why, one has to go back to the year 1966 when Singapore's Parliament passed the Land Acquisition Act. It came into effect on June 17, 1967 and gave the Government the power of compulsory land acquisition for public development. It also regulated the amount of compensation to be given to landowners who had their properties acquired.
The Government stepped up its land acquisition programme. Between 1959 and 1984, it acquired 177 sq km of land - about one-third of Singapore's total land area then. The bulk of this land bank was acquired after 1967. By 1985, the Government had become the city state's biggest landowner - owning 76.2 per cent of land in Singapore, more than double the 31 per cent in 1949.
Between 1963 and 1985, HDB, a housing agency, built over 500,000 flats to provide affordable housing for over 80 per cent of Singapore's population. Today, HDB's total housing stock stands at over one million flats of various sizes.
That is a far cry from Hong Kong, where the housing market is controlled by private developers - property tycoons whom Beijing's political organs have condemned of late for "hoarding land and grabbing money".
In 2007, years after controversy over the Land Acquisition Act had died down, former senior civil servant Ngiam Tong Dow spoke on it. He said the principle upon which it was based was clear from the outset, and it was "that the larger interest of the community must take precedence over the rights of the individual".
"If property rights are absolute, then our HDB towns could not have been built. The modern Singapore we call home would have remained a stagnant town of slums and swamps. The Land Acquisition Act is the legal bedrock for the acquisition of private land for development of public infrastructure.
The Act's core principle is that private land can be acquired only for a clear public purpose. In the Singapore context, private land is compulsorily acquired for infrastructure, such as roads, HDB housing, schools, hospitals and public parks. The process is open and transparent," he said.
HOUSING AND STABILITY
In 1984, Singapore's founding prime minister Lee Kuan Yew said in his National Day Rally speech that his Government had always intended for people to own their homes, and had thus planned for a massive building of new towns and new estates. "We have a vital reason for ensuring that everyone owns at least one home.
"Homes are immovable property. All legal systems recognise the clear distinction between the movables and immovables. Movables like gold, diamonds, works of art, can be moved abroad and have a worldwide market. Singapore can go down but the price of your kilo bar of gold will not be affected.
But your home, landed property, depends on the climate of confidence, the stability, orderliness and prospects of growth. When confidence is shaken or disorder sets in, landed property prices will collapse. Home owners have a vested interest to ensure that the value of their properties does not collapse through foolish and reckless actions."
"Hong Kong's property prices may not have collapsed but recent events show that some Hong Kongers believe they have little to lose by wreaking havoc. Correction note: An earlier version of the story said Mr Lee delivered his speech in 1994. It should be 1984.
Adapted From The Straits Times, Oct 27 2019