We noticed that a recent post on the Straits Times (ST) forum page pointed out a disturbing trend in our housing market.

A reader wrote in to say:

“While house-hunting in the HDB resale market recently, I came across a number of permanent residents (PRs) who were selling their flats as they were returning to their home countries or emigrating to other countries.

A few property agents have told me they are seeing more PRs doing so.”

Perhaps they wished to capitalise on the current Singapore property market, and retire rich back home. Or perhaps property still has much potential in their home country, and they want to get in on it while it is still a new market, using funds obtained from the dramatic increase in prices here.

Whatever their motive is, it seems that PRs are playing the game that has been set out before them. We at BLUTA would like to question the rationale behind setting up such a game, however.

We would be the first to admit that PRs do contribute to Singapore, and many sincerely wish to start a new life here. But do the current policies really encourage that gradual change of mindset from PR to Singapore Citizen? The disturbing observation by the ST contributor seems to indicate not.

Allowing PRs to buy public housing, and then allowing said public housing price to fluctuate with the open market has created a mentality that is not desirable. Is this profit and rent-seeking mindset what we truly want in our PRs? Is this the mentality we should be attracting and cultivating? Yet, giving them access to public housing that can amass a fortune from capital gains is encouraging precisely such behaviour!

What’s worse, even those who were initially sincere about putting down roots will be tempted to cash out by the soaring prices on their Housing and Development Board (HDB) apartments. Such a windfall would serve them well in their home countries. Many of our developing neighbours have started growing their economy, and they would be able to live like royalty or set up a business, instead of scrounging for a living in ever-costlier Singapore. Speaking of which, who do you think will end up having to buy all this costly housing in Singapore?

You guessed it. In the end, the Singaporean man-in-the-street is stuck with the high price tag, for they have nowhere to bail out to, no other home to seek refuge in.

We cannot stress more that we should welcome productive and talented PRs. We can benefit from such potential additions to the Singapore family. It goes without saying that we must also provide a conducive atmosphere to work, live and raise a family. However, the current method of doing so not only is detrimental to our lives as Singaporeans, it also seems to have the opposite effect, encouraging them to cash out and leave instead of staying here and putting down roots.

In any case, as we have stated many times before, public housing is not the avenue for such rent-seeking and capital gains behaviour. We already have the private property market to perform that role. We firmly believe that a stable, long-term rental option for PRs will ensure security while also dampening enthusiasm for capital gains in an already over-fervent market.

A comprehensive rental scheme is a viable alternative, if we do not try and squeeze every single ounce of profit from it. It would have the benefit of making rental homes a viable option for many levels of society, while keeping a damper on the prices of property in Singapore.

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  6 Responses to “Permanent Residents’ Windfall – At What Cost?”

  1.  

    But these PRs would have bought their flats on the open market, without government subsidy, so is it right to fault them on the windfall? Bear in mind that they do so with risk since the property market could collapse as well.

    I do agree though that given limited public housing, we should look at restricting PRs from buying HDB flats and creating a lively rental market to meet their needs.

  2.  

    I disagree totally… This is because Sporean can buy BTO while PR can only buy resale. This means whatever flats the PRs are selling are bought from S’poreans in the 1st place. The previous Sporean owners is likely to have benefited from the txn. Why deny this opportunity from S’poreans in the future?

    As a Sporean I like the current setup that enable us to get the flat from govt so long the price of BTO is not linked with the resale price (currently MND minister Mr Khaw said he had de-linked the 2).

    The cost of having to build flats to lease to PRs will be costly to Taxpayers, why do we want to do that!?

    Furthermore alot of the older S’poreans supplement their income by renting a room out to PR or foreigner, why do we want to reduce their incomes and affect their retirement?

    The best the thing govt can do is to lower the price of BTO flats are de-link it from the resale mkt (which Mr Khaw had promised to do and we are still waiting…), while ensuring PRs can only buy resale flats.

    That is the simplest way and best way forward as it will ensure that S’poreans can have a chance to benefit from their flats in the future.

  3.  

    This happens every where in the world, eg I have witnessed Singaporeans buying properties for their kids studying overseas, and then making a profit. What is your purpose of this post?

  4.  

    Hi..
    It was a nice information that is kept in the blog,
    I would like to add few personal experiences that i had,

    First of all i am a PR,
    I came to Singapore in 2006, Pursued Higher education and currently working in Singapore,
    I am quite happy to my decision that i choose Singapore as a place to live and work,
    At some point of time in last 6 years, I was in a impression that i want to convert into Singapore Citizen, because the tax i pay seems to be peanuts compare to the infrastructure i am enjoying. Over all it a good place to live and Singapore government is more stable and well structured policy making organization. In-fact my family was ready to support my decision. But now, i have changed my opinion. Specially effected by HDB rental market. In 2006 i used to pay 800SGD for a 3 room house and i used to stay quite comfortably enjoying life and thinking about future plans in Singapore. Now for the same 3 room flat, i am paying 2100 SGD, which in most of the cases is 35%-50% of avg income of a working personnel in Singapore. just think the rate of increase of income is much much far less than rate of change of rental. Last 3 three years the salary hike is not even as much as that of rental increase…!!
    I support your opinion, that people are more looking as a profit making business rather than making life secure and stable.
    I welcome your opinion, that people should think of having rental prices under control and may be certain housing rental system to PR’s so that the over heating property market will cool down as PR’s will not think of buying a house for investment purpose i.e. to save rental money..!!

  5.  

    are you kidding about a decent rental scheme? what’s the name of that company that’s allowed to rent out HDB flats that have been cleared out by HDB supposedly for ‘redevelopment’, yet the next moment you have all sorts of foreign students living in them?

  6.  

    @Sean… What’s the name of that company..? Name is EM Services.

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