Apr 23, 2011

Mah Bow Tan is "Proud" of the Asset Enhancement Policy

While busily arguing with the Workers Party, Mah slipped up and uttered a blooper. He said that he was "proud" of Singapore's asset enhancement policy.

People who understand this topic will remember Mah's statement, long after the 2011 elections are over. For this statement is a very naive and foolish one.


If you are too young to know what the AE policy is all about, just click here to read Tan Kin Lian's old post. His explanation is simple, short and sweet.

Essentially, the AE policy makes HDB flats more expensive. According to Mah, this is a good thing because your home becomes more valuable.

For most Singaporeans, this statement is largely nonsense. That's because people need homes. If you cash out by selling your flat, you still have to buy another home. If you buy a similar home, it will cost as much. So obviously, the AE policy is not making you rich.

(God, this Mah person drives me crazy. To think that I have to explain such obvious things on my blog).

The real danger of the AE policy is that it will seriously drain your CPF savings. First, let's get back to basics. Recall that the main purpose of the CPF is to help you to save for your own retirement.

This is especially crucial in Singapore, because the government here (unlike most developed countries) has no safety net for the old. You have to look after you, in your own old age.

However, the government also encourages you to use your CPF to pay for your HDB flat. In fact, after all these years of stagnant wage growth, many Singaporeans would not be able to pay for their HDB flats, if they were not allowed to use their CPF.

Now, as the AE makes HDB flats more and more expensive, what does that mean? You will be forced to use more and more of your CPF money to pay for your HDB. In turn, that means you have less and less money for your retirement.

That is why older Singaporeans are often said to be "asset rich, cash poor". They have a roof over the heads, and it might even be a very nice roof. But they have little money to meet their everyday needs, and many of them will have no viable option to monetise their home.

(Please note that I do not consider selling your home and living in the void deck as a "viable option").

That is also why in recent years, the government keeps reiterating that you need to save more for your retirement, and that your CPF money is not going to be enough, for your old age.

For it is true. The asset enhancement policy (which Mah is so proud of) is steadily making the CPF system a failure.

50 comments:

Anonymous said...

These enhanced assets are the real tax on singaporeans. Some people sing praises of the pappies because of low tax rates as compared to developed countries like uk. But what they don't realise is these hidden taxes charged via inflated public housing and car costs.

The best thing is that PRs who move out of singapore after earning enough cash will not incur these hidden taxes, leaving true blue singaporeans to pay the true cost of running this country.

I should give up my citizenship and become a singaporean PR if pappies country their unfair reign.

Anonymous said...

[Quote]For most Singaporeans, this statement is largely nonsense. That's because people need homes. If you cash out by selling your flat, you still have to buy another home. If you buy a similar home, it will cost as much. So obviously, the AE policy is not making you rich.
[/Quote]

You've left out the tax/charges per transaction. Thus, selling and then buying a similar unit leaves you will more debt :D

Anonymous said...

Asset enhancement favours those who own (fully paid or still under loan) more than one home! 2nd home solely for investment.

Or those whose homes, bought cheaper years ago, have already fully paid up, whether cash or loan.

What percent of voters are these people?

I don't know but maybe Mah Bow Tan knows since being in government he definitely has all the relevant data.

Who knows, it may even be at least 60% of the voters!!!

Maybe Mah Bow Tan is so confident to say those things because he knows something that we don't.

Maybe that's the secret weapon of the PAP!

Anonymous said...

Mr Wang, don't be mad with this guy. He screws up and tries to reason it out. The more he does that, the more obvious it is that he screws up. Let him show the world what he is worth. Millions? My foot!

Anonymous said...

Not only that, it divert away from more productive use of your savings!

Anonymous said...

I sold my home and bought another one. By sacrificing on location, I earned my first tub of gold. AE really works!

Anonymous said...

Me too! Thank you Mr Mah! Long live AE! Working for my second house already with the first tub of gold.

Anonymous said...

One man's meat is another man's poison.

As a politician, just make sure those who consider it as meat are the majority.

Put in a well designed GRC system, and you will be assured of at least 90% seats, even if you win only 50+ % of the total votes.

As long as the opposition is not strong and united as one party to take over the government.

Because the voters know that although I may be bad, the opposition will be worse.

So what choice do the voters have?

harminder said...

It's worth remembering that Mah did not come up with this himself. I remember seeing it as the front-page headline of the Straits Times sometime in the early 1990s, as the main theme of a speech by Lee Hsien Loong. What I find really bizarre is that so many Singaporeans didn't see through the illogicality of the argument for so long.

Anonymous said...

To be fair, in the early 1990s, prices of HDB flats are still quite OK lah, relative to income.

For instance I bought my new exec flat in Bedok for only $172K in 1992.

Now the resale price is nearly $650K!! And there are ready buyers!!!

And for new flats with smaller area than mine, it is already selling for $450-500+K!!!

Of course for those who had paid up already OK lah. But for the young people very siong (tough) man! Their pay where got increase 4 or 5 times since the early 1990s?

But can this group make PAP lose the election or not? Not likely lah, if they are less than 30% of voters.

May be Mah Bow Tan is not that naive or foolish after all.

harminder said...

Also, in reply to Anonymous at 9.38 am and 9.46 am: yes, it's true some Singaporeans did make their "pot of gold", but there are a few issues with that argument: 1) how long can this go on for? There's a limit to the amount of housing that can be built here, unless we are OK with living in smaller spaces. 2) young people who are starting out in life are permanently stuck behind because they missed the bandwagon in the 90s and 00s. 3) the ever-increasing indebtedness, like Mr Wang says, made worse by the stagnant median wage in Singapore. It's the whole "1st world costs, 3rd world salaries" story again..

Anonymous said...

When it comes to buying a flat they say 'Increase the price' and when it comes to increasing salary, they say 'No. We need to be more competitive'

What does this mean? More expensive housing and less cash in our pockets. The only people raiding the reserves is the government giving it all away to MNCs.

Anonymous said...

"Asset enhancement favours those who own (fully paid or still under loan) more than one home! 2nd home solely for investment.

Or those whose homes, bought cheaper years ago, have already fully paid up, whether cash or loan."

But the language is used in the context to justify the higher price of HDB new flats, if not mistaken. So how does it help new potential buyers.

And who needs to be told or reminded about the element of asset enhancement for those having 2nd or nth home (either private or HDB) as an investment. Do you think the noise is made to 'help' this able group.

Anonymous said...

Mr Wang, I'd like to point out there's one group who may 'benefit' from asset enhancement - those living in 5-room flats who do not have kids and intend to downgrade for retirement. Those living in 3 or 4-room, who do not have kids needing to marry and buy flats, may be neutral or even foolishly happy about their flats' price increase. Even those with kids who need to buy flats may think more about themselves rather than their kids and support asset enhancement. Generally Siingaporeans see HDB flats as investments and not as the homes to live in that you mentioned. They like to see their flat prices go up and not down. Therefore Minister Mah will still win the upcoming election.

Anonymous said...

"As a politician, just make sure those who consider it as meat are the majority."

You are right. But the cohort of majority may change to a cohort of minority in the passing of time. By then, the politician may not be around to bear the consequences & responsbility.

That is why feedback & discussion are important with transparency & openess on information among all affected stakeholders.

Anonymous said...

Like many other developed countries, Singapore will be facing the problem of an aging population. Unlike other welfare states, you have to take care of your own welfare in retirement with what is left in your CPF account. It does not help when your CPF money is grossly reduced by the AEP.

yh said...

First, he says that he cannot predict the demand for flats so did not build, fearing that there will be a surplus.

Now he says that he is "proud" of his AE policy.

So are the sky-rocketing prices an intended consequence or not?

Anonymous said...

This PAP`s agenda of AE and obsessive pursuit to accumulate
reserves have had dire side effects.
To bring in FTs and increase the
population to 6.5 million are
to cheapen the average labour cost
and attract corporations to set
up in this tiny red dot. This
will subsequently bring in more
corporate and personal taxes and
thereby increase the reserves.
The whole garmen machinery has
this obsessive desire to profit.
Theoretically, its good that we
run on a meritocracy society.
But there are some things that
cannot use the principle of
capitalism.The HDB flats are NOT
private properties, and therefore
should not be manage on a capitalist principle.For crying out loud,its just a lease, like rental!
That makes this whole affair so
illogical and unfair.
By the way, if the PAP believes
in meritocracy, how come no
one is ever fired in their white-
shirted brigade and where is the
allowance for oppositions
to thrive so that there is fair
critics and competition for their jobs?

Anonymous said...

Actually to make sense lah, do you really expect a politician to admit to screwups during an election season?

Or as an analogy, do you want to write negative things in your job resume?

So, sometimes we have to take those utterances, whether from PAP or opposition, with a pinch, spoonful or even a bowlful of salt, depending on what they are.

One may be happy and also unhappy with the PAP, but is there "net" happiness? That is, more happy than unhappy. If yes, one will vote PAP, if not, don't vote PAP.

From past events, at least 60% have "net" happiness with PAP, based on the above.

Anonymous said...

http://mrwangsaysso.blogspot.com/2011/04/mah-bow-tan-is-proud-of-asset.html



Below are my thoughts after I read this article:

1. Original Intent is good. ie HDB is a public housing scheme that is good quality and affordable housing for Singapore Citizen. However, actions are differed from the original intent which I think is totally not aligned. When there are excuses, they are all lies to achieve something that is not intended.

2. Singaporean must be the main priority and that all land are belong to Singaporean and not PR or foreigner. Therefore, HDB aka public housing must be cater to the needs of Singaporean.

3. My take on how to go back to original intent: Singaporean buy HDB at a concessionary price, PR will buy at market price. PR eventually become Singaporean shall also enjoy such concessionary. Simply put it, if a foreigner wants to come to Singapore and start a new life, he or she must understand that he or she belong to Singapore and will have the privilege. So what happen to those paid such a High Price by the current government? Singaporean can sell to PR at the market price, if they sell to Singaporean, they will get less but they will pay at concessionary price for a new HDB.

Above are my 10min thoughts, I do not read others but just saying my thoughts.

YL

Anonymous said...

Welcome back Mr Wang, your direct and insightful posts on real issues have been sorely missed.

I agree that AE is another form of tax. Drain your CPF to pay more for your HDB, then govt can say that GDP has gone up and reserves are swelling so can justify paying themselves more.

The original intent of HDB has been lost. Now HDB is behaving like any other private developer but with the high profit margin due to low landbank cost. All profits made by HDB are then wasted on things like YOG and ministerial salaries

Lam Chun See said...
This comment has been removed by the author.
Anonymous said...

LOL. I like this post, Mr Wang.

Lam Chun See said...

The govt's rational for the Asset Enhancement policy is that it encourages Singaporeans to own a stake in this country and thus become 'stayers' rather than 'quitters' - to quote our wise former PM GCT. Unfortunately it has the opposite effect. Many Singaporeans of my generation (born in 1950's) bought their houses cheap in the 80's. Many sold their houses at a hefty profit and migrate to Australia and Canada, where they can afford to buy huge bungalows using only a fraction of their profits.

Anonymous said...

"From past events, at least 60% have "net" happiness with PAP, based on the above."

As long as the factors contributing to your 'net' happiness continue to stay so or ramain so. And before new information which may not have been made known to you previously start to appear affecting your assumption, hence tilting your happiness balance.

From past events, we had a president not elected in a grand scheme called elected presidency.

Sleepless in Singapore said...

"this Mah person drives me crazy" .....

This is the same minister who referred to Spore as "a nation of immigrants". In 2007, he promised that with "judicious and wise use of space", Spore would not 'burst at the seams'. I thought at that time that we were already bursting at the seams. Now 4 years later, the situation has not improved; but worsened considerably.

Parka said...

This is why I can never understand the point of Asset Enhancement. It's only for people who trade property or treats property as an asset literally (e.g. by renting).

I just cannot see what's Mah Bow Tan's value proposition.

Parka said...

Here's why HDB prices are so high:
High HDB prices = people working their whole lives = high GDP.

One of the easiest way to increase GDP is to have hardworking citizens, very hardworking citizens.

Anonymous said...

Firstly, MBT is a dud and will always be. AE benefits those who cash out and emigrate. Or the old generation who conveniently die off and leave assets to their children. It is bad for those who for any reasons have to sink roots here for lack of choice (the majority of S'poreans). Therefore it depends on which end of the equation you are at. What is very obvious is we are already in a huge bubble which will take 30 years to unwind, and your children will be the ones paying for the cost of the stubbornness and folly of a few decisions makers.

Anonymous said...

Mr Wong if what you write is true then what is the basis for Mr Mah's very large salary? After all he is not a good minister for housing and also not a good politician with his bloopers.

Oh dear me.

NotesSensei said...

My understanding of the logic:

1) CPF funds might not be enough for retirement

2) A typical HDB dweller will at some point have a family and a HDB big enough to accommodate him/her and the offspring

3) When retirement arrives the offspring is long gone and either the HDB flat can be downsized or sold (and the dweller moves in with the offspring)

4) New HDB flats and subsidies enable first time buyers to enter the HDB game

5) Ever rising house prices ensure that the money from selling or downsizing enables retirement


The plan has some critical factors:
- House prices must rise faster than cost of living otherwise profit from downsizing/selling is too low for retirement
- There must be offspring (for the need to upsize or the destination to move in)
- New buyers need to be able to enter the market
- Enough buyers need to want to upgrade, otherwise selling of the large flats won't work.

... fast rising house prices smells like asset bubble, wasn't Singapore there in 1998? Or ask an US home owner.

It is anybody's guess how that will work out. Btw. I live in HDB.

Anonymous said...

The foreigners will definitely benefit from this. Once they decide that it is time to pack up and go home, all they have to do is to sell their flat and... Ta-daa! Instant cash!

Anonymous said...

Mah rebutted the WP's proposal
for pegging the price of new HDB flat to the median salary.He said this will bring about a fall in price of existing HDB flats,and will make 1 million HDB dwellers unhappy.
So he is assured of 1 million out of the 2,3 million votes. But seriously, there's 1 MILLION all waiting eagerly to sell out ? To downgrade? Make money and emigrate? If so,what deep doodoo have we got ourselves into??

Anonymous said...

Mah is trying to do damage control for his failed housing policy. What he fails to see is that the housing prices (even the HDB prices) have shot up so rapidly and steeply in the past 2 years that is beyond the reach of any ordinary working Singaporean. THe recent bank loan policy allow you to repay the housing loan till you are 70 years old. After repaying your housing loan, you are left with nothing for retirement. Workers Party proposal of pegging HDB prices (for first time buyers) to the mean salary make sense. How else do you expect the next generation to feel connected if the public housing policy is against their own people. Mah is talking rubbish and just want to side track the hot topic because he did not react in time to cool the market.

Anonymous said...

Mah say Gov't cannot reduce the reserved price of the land cos it will tantamount to raiding the reserves of Spore. So we ordinary working folks work away our whole lives to build up the coffer in the reserves so that the ministers can raid it via their million dollar salary. Shame on you, MBT. It is better for you to shut up and resign straight away then to stand for election. Real shame for you to be so uncaring and balantly arrogant.

Anonymous said...

In 2001, or 10 yrs ago, Lim Boon Heng said that Singaporeans are asset rich but cash poor. Debt is borrowing from the future plus interest.

Anonymous said...

Sure why not be a stayer in Singapore? But I would also like to get a sense of equity and fairness. Why should I pay 100 thousands of my hard earn salary to pay for my HDB flat which will force me to continue paying may be well after I retire eating into the very CPF that is suppose to take care of me in my old age. Many have correctly labelled the PAP as Singapore's biggest Ah Long! But just as bad is that the PAP government has through their policies enabled some fellow citizens to profit by owning an HDB flat and another property as investment vehicles. Well good for them but what about the rest of us who are not as savvy or investment smart? The PAP vision of Singapore society is to fuel a society that practice the law of the jungle! I prepared for change and vote in the opposition.

Anonymous said...

it's almost like marie-antoinette saying that the people can have cakes if there's no bread!

Anonymous said...

i'm a "poor" Singaporean... love this post and most of the comments above!!!!!

Amused said...

Japanese property prices were super enhanced by government policy in the late 80's. How did that work out for Japan? (Hint: you don't even want to get there.)

If MBT's AE policy failed as badly as it did in Japan, he will be long gone with his millions. But you will be the one holding the bag.

You can read more about the Japanese asset price bubble in Wikipedia -

http://en.wikipedia.org/wiki/Japanese_asset_price_bubble

boss said...

Sell your house to support your retirement. then sleep along our coastal line. thats what our government means.

Anonymous said...

A bubble burst like the Japanese will hit us like a tsunami.

The Japanese are extremely frugal people with huge cash savings. That helped them survive the bursting of the property bubble.

A property bubble burst in red dot means a total wipeout of Singaporeans' CPF savings invested in the house. The bursting of that bubble would probably affect all sectors of the economy with massive job losses. Not many Singaporeans have cash savings like the Japanese, and neither will they be able to cash out of their properties with prices diving.

What does that mean?

Well, not to worry. They cannot let that happen after repeated enhancement of your HDB properties, can they?

Anonymous said...

are there cheaper housing than HDB? I can't catch up with this mad world. Help!

Anonymous said...

Asset enhancement policy only works if you are in a position to take advantage of it, i.e. buy a house, let it appreciate, get PR elsewhere, sell the house and emigrate, get citizenship elsewhere, renounce SG citizenship, liberate your CPF.

In any well functioning capitalist system, somebody must win, somebody must lose. Even if you are into private property, the AE policy will still hit you. The only way to benefit is to leave SG.

And my family are now proudly Australian. Proud to write to my Senator to object to the SGX takeover deal for ASX and exercise my political rights, and let him know that it should be representing my voice in Parliament.

Anonymous said...

Not surprised by the illogical arguments of the PAP.
When we retire, we will be very proud of our homes, but we can't even afford to enjoy the life we had when we are working. All our savings are in paying for our homes, and living expenses even for public services like transport are high because the companies running them want to be profitable.
GST is now 7%. When you retire, this 7% is very high. Of course, statistically they show that the rich pay more GST. But every cent counts when you are not so rich.

The PAP claims to be far sighted. But if you look at the need for lift upgrading, you realise that they did not have the foresight to have lifts on every floor in the beginning. Now they turn around and say they provide a solution to a problem they created because of their short -sighted view.

Anonymous said...

What is the use of building a hefty national reserves which the people unable to benefit from? The high prices of HDB flats are definitely robbing the nationals off their retirement funds.
I used to believe that I can rely on this nation, to look after it's citizens' best interests and vice versa. However this AE concepts had indeed benefited many, except the truely native Singaporeans.
Honestly, I am not proud of how much my HDB unit can fetch in the open market. In fact, I am more concerned if I will be able to sustain the high installments when I am out of job, or can the younger generations of Singaporeans afford to secure a decent roof over their heads without paying through their noses.

Anonymous said...

MBT has really made a boo-hoo of the public housing for singaporeans.The younger people are caught in thei crazy sky-high prices of hdb flats. even with the subsid etc, these people have a real tough time catching up with the prices. By the way, why is the govt not releasing surplus unsold SERS new flats to the citizens who are 1st time buyers?

Anonymous said...

Seriously you people need to know the history of Mr Mah Bow Tan. Of course he is proud of himself. Without him, I bet that the Ministers' pay will not be as high as what it is today.

When Mah was the transport Minister, he roll out COE. Do you have any slightest idea, how much COE the government has collected from Singaporeans? Rationale for COE is to solve our congestion and to manage our traffic. Today, roads are more jammed than ever before. COE only make the government richer and justified the Million dollar pay packages of our Ministers.

When Mah move office to MND, watch how the prices of HDB shoot up. Not 10%, not 20%... but probably more than 50%-100% at least. Imagine the amount of profit he has made for the government.

Mah is the sole breadwinner of the PAP. Even if he is not the Mastermind, he is the elected scrapgoat of the government to push out these policies to rob the Singaporeans of their hard-earned $$.

About time, we make him sorry for running Singapore like a company and treating us as consumers and not part of the company.

Ethan said...

In order to take advantage of his asset enhancement policy, the plan is this - in your old age, sell your HDB flat and emigrate to JB for your retirement.

Shawn said...

Most S'porean own one property, be it HDB or private property, so MBT is talking rubbish when he talked about asset enhancement. Where do we live if we sell our property. We are not making millions like MBT. I believe he owns many properties so the Enhancement Policy benefit him well. Pity the young couples who might have to work their whole life just to finance a pigeon hole. Can Tampines residents bind together and get this idiot out of the way