Gated Gardens: Singapore has basically two kinds of real estate—luxury, or state-run
By Sonia Kolesnikov-Jessop | NEWSWEEK
Nov 12, 2007 Issue
Located just 10 minutes from Singapore’s bustling docks, Sentosa Cove is a world apart. The road leading into the city’s super-posh residential complex runs past a championship golf course framed in tropical jungle. Four years ago much of the reclaimed land was barren; today a 117-hectare gated community with homes more than $10 million apiece has risen to become one the most select addresses in Asia, replete with waterfront boardwalks, meticulous landscaping and a yacht club. “These people who buy here have a choice to live anywhere in the world,” says Jennie Chua, chairman of Sentosa Cove Pte Ltd, “so it’s heartening that they’ve chosen to buy a home here.”
Singapore has long been a magnet for expatriates. It’s an ideal gateway for business people who travel regionally but want their families to enjoy a clean environment and First World amenities, including top international schools and state-of-the-art hospitals. The city’s emergence as a vital Asian financial hub has added to the lure in recent years, attracting hordes of well-heeled bankers and fund managers. Government policies have moved toward recasting the port city, with a population of 4.5 million, previously known for its buttoned-down uniformity as the Monaco of the East. To that end, two new casino resorts are under construction, and the city will stage its debut Formula One Grand Prix next year.
So what’s the problem? Admission to the “Singaporean Good Life” doesn’t come cheap. Singapore, perhaps more than any other expat hub, has a two-tier housing system. While 1 percent of the population lives in high-end luxury homes, like those at Sentosa Cove, 84 percent of the rest live in public housing as private spaces become more unaffordable.
“Public housing in Singapore is just not for the low-income. It’s for the middle-income and even the upper-middle-income,” says Mah Bow Tan, Singapore’s minister for National Development.
The situation won’t get better any time soon. Increasingly, the city’s competitiveness hinges on the arrival of ever more foreign professionals. Some 30 percent of its population today are foreigners, compared with just 14 percent in 1990. Singapore’s declining birthrate means this ratio will increase further. A bifurcated city is taking shape. On one side: a vibrant metropolis with tree-lined shopping arcades, fashionable bars and restaurants, gourmet grocers, art galleries and lavish condominiums. On the other: a public-housing heartland of small flats where most of the population resides, generally content, but without any real hope of escape as the price gap between private and public housing keeps widening.
Singapore’s public housing was conceived of shortly after independence as a means to elevate poor Singaporeans from slums. Households could purchase or rent subsidized flats, often with government loans, in developments that rank among the best-managed facilities of their kind in the world. Buildings are usually well maintained. Strict integration policies also prevent them from becoming ethnic enclaves, as did housing projects in France or the United States, for example. Indeed, they were a critical component in the government’s campaign to engineer a multi-racial society from a population consisting of Chinese, Malay and Indian immigrants.
Until recent years, the plan was to shrink the city-owned share of the housing stock over time, as owners who grew more prosperous sold their starter flats and moved into more-luxurious private digs, and fewer first-time buyers required subsidized housing. Now it looks like Singapore’s rising international stature and popularity among expatriates could undermine that plan. Exploding home prices recently forced the Housing Ministry to raise the maximum grant for first-time buyers by 50 percent and relax the qualifying criteria for lower-income households. “This is quite a significant shift from several years back, when the government indicated that the role of [the Housing and Development Board] may be down-sized,” says Chua Hak Chin, economist at Citigroup.
Efforts are also underway to spruce up the facilities. Recent designs look more like private housing; the architecture has become less utilitarian and more environmentally aware. One planned development even has a beach and a boat dock. Still, while such schemes might tamp down resentment felt toward the select few who can afford the gated-access lifestyle on display at Sentosa Cove, they don’t change the fact that in Singapore, one of the richest places in Asia, even the middle class are now risking getting off the private-property ladder.
Singapore’s fast growth is beginning to be expensive. Increasing prices in just about everything has overshadowed the city state’s prosperity in the last four years.
THE city-state has been hit by an unceasing bout of price increases that has overshadowed the city’s prosperity in the past four years.
The latest series of price hikes came recently almost days within each other on household necessities like bread, noodle and live chicken (by an average of 20%) – and bus fares by one or two cents.
(This came only a year after fares of buses and trains were raised by one to three cents.)
Hardly had the public time to ponder the impact when the government dropped another bombshell. It substantially raised the Electronic Road Pricing (ERP) rates for the third time this year.
This will hit the pockets of some 800,000 car-owners, not to mention buses and lorries.
Under the system, they are charged electronically every time they use certain stretches of roads and highways during busy hours, according to places and times.
The peak charges will go up on Monday by $1.50 to $5.00 – or 43% at the worst point. Others are slightly cheaper.
Incredibly this is the third time in 2007 that ERP rates are raised, and the public protests have been uncomplimentary and loud.
Inflation is at its worst here in 12 years and has become the people’s biggest worry today. For many, the high costs are blurring the Singapore Dream.
Worst affected is the broad middle class, which is already paying dearly for the high oil price and a punishing five-to-seven per cent rise in the Goods and Services Tax (GST).
Since the beginning of the year, a wide range of products and services – including housing, hospital and medical care, education, electricity – has been skyrocketing.
Hardly a week passes without an announcement or two of some price or government fee going up.
There are two immediate effects. The value of money is dropping by the week, and savings are discouraged since consumer prices are rising faster than interest the banks pay on deposits
Some other recent price hikes:
> Electricity. Costs up by 4% between October and December. In the last quarter, they had been increased by 9%.
> Fees in certain schools up 10%-12%; university fees had been raised earlier. One special needs school doubled its fee.
> Average hospital bills were up by 10% to 30% with subsidised class C wards chalking up the highest percentage increase. Polyclinic charges were also raised.
> Cigarette prices went up by some 40 cents a 20-package to S$11.60, or 3.6%.
There were hikes on cable TV, car insurance, car parking and postal charges, as well as goods from milk to Milo, cooking oil to coffee, canned foods, processed foods, wheat products – and many other items at supermarkets.
The government appears unable to take action to stop the epidemic, a contrast to the first-generation government during such crises.
It launched NTUC Fairprice in 1973, a workers cooperative, to stem out profiteering on rice and other necessities.
And ministers and parliamentarians at the time would move around marketplaces and shops, appealing to shopkeepers to be sensitive to people’s financial needs.
Like previous inflationary times, this one is largely imported, the result of higher oil and other imported products.
The second cause is a robust Singapore economy, which has been growing at an average of 7.6% a year since 2004. This year 8% is expected. It creates demand.
Business has been relatively strong, salaries have risen (civil servants just got a 6% pay hike) and unemployment is the lowest in 10 years.
But so strong and persistent is inflation that many Singaporeans feel they are the poorer for it.
Part of the cause is the government, whose priorities are economic growth and asset accumulation (for foreign investments) – even at the expense of a higher cost of living.
To that end, it has increased GST from five to seven per cent and may eventually reach 10 per cent. Fees for public services are being raised to ensure no drop in Treasury collection.
Deficit budget, although not entirely unknown in Singapore, is a very rare happening.
Many young professionals who just start off in life are worried that the sharp run-up in property prices (a boon for 85% homeowners) has made it virtually impossible for them to buy a flat.
Some are putting off marriage or raising children.
The people see high prices as being here to stay – a new feature of life in a fast over-crowding city that wants to see a population of seven million.
Mr Lee Kuan Yew has said that Singapore is not only a developed country, but occupies ‘the top half’ of the First World.
Keeping it there not only brings wealth but also a new painful structure of expensive living comparable to the likes of Paris and Tokyo.
Understandably inflation has become a hot debate subject.
Blogger ‘Raul77’ points out that Singapore has neither land-size nor natural resources, so “it can either be a 1st World country or a poor one. No third way about it.”
As a result, life is always stressful, and those who can’t take it are leaving for quieter, bigger countries.
This is tough for the middle class and working class, which are just struggling for a living amidst the perceived wealth, unhappy and with few choices in life.
To which Nornan Lee replies: “If Singapore is not worth living, then nowhere is worth living.”