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The Housing System In Singapore Economics Essay

Singapore is as a unitary republic independent on 9 August 1965, and it is a supposedly democratic state. It is one of the worlds most prosperous nations. The economy normally is dominated by services, and this is also a major manufacturer of chemicals and electronics. In Asia, Singapore is a smallest in terms of total area. The size of the nation is 707.1 square kilometres, which equates to 270 square miles.

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Singapore is a modern cosmopolitan country. After centuries of immigration, Singapore has three major ethnic; they are Chinese, Malay and Indian. Therefore, each group fosters a variety of language, cultural attributes and religious which becomes the multicultural face of modern Singapore. These influences have crossed the boundaries of ethnicity with most Singaporeans enjoying the food and religious celebrations of each of the three main ethic groups. Thence, there are four main languages in Singapore – Mandarin, Malay, Tamil and English. English is the official language, uniting all ethnic groups with a common language.

Singapore also is one of the wealthiest countries in the world and a hub for tourism, scientific research and manufacturing. With a large population dominated mostly by Chinese people, Singapore is one of the powerhouses in Asia, with a large export economy and a solid grounding in worldwide organizations such as the United Nations.

In Asia, Singapore is one of the most important nations which has grown into an economic powerhouse and a highly developed free market economy. It has an open business environment, is relatively corruption-free and transparent, and has stable prices and one of the highest per capita gross domestic products (GDP) in the world. There have many visionary investors will be looking to Singapore’s real estate, as a same time they have many favourable conditions become a lot of real estate investors interested.

“Singapore is a newly industrialized country with the famous nickname of ‘garden city’. Since 1964, the Singapore government has introduced the Home ownership for the People Scheme to help the group of low-income people to rent or purchase a public house for their family. Four years later, the government allowed people used their Central Provident Fund (CPF) to be the down payment as part of their housing purchasing fee. More and more people in Singapore had own their house, since owning a house was not a difficult thing for them. Housing and development board (HDB) is the government departure formed to response implement the public housing scheme including manage the new housing planning and development process and allocation the low-rent housing to people needed. The Public Housing Scheme of Singapore is one of the most successful examples of affordable housing production in the world. More and more countries try to learn the experience from Singapore public housing scheme to solve the housing development problem in their countries.

For the public housing policy, the truth is housing situation in Singapore that ‘More than 80% of Singapore’s population lived in HDB flats, with 95% of them owning their HDB flat’. This achievement based on the housing policies of Singapore are concentrated on solve housing problem for residents and formed social wild sense that ‘everyone has the right of adequate housing’. Under these housing development strategies of government setting, Singapore achieved more than one 17 time successful but make the national housing sustainable development.” (Jingchun Lin, 2011)

The housing market in Singapore, private homeowners and public homeowners are well segmented by home ownership. The public home ownership sector is the dominating sector accommodating 85% of total households.

Table 1: Housing System Tenure Changes in Singapore (1970-2000)

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Sources: Department of Statistics (1970, 1980, 1990 and 2000), Singapore.

From table 1 show that in years 2000, Singaporean household’s tenants constitute 6.6%. Most of the households are in the lowest income group, to rent one or two room public housing.

The housing system in Singapore

According to the 1948 Report of the Housing Committee, 72% of the population was housed within the central area with densities of about 1,000 persons per acre in Singapore. In addition, the government established the Housing and Development Board (HDB) on 1 February 1960, to provision of low cost public housing and related facilities for sale or rent to target households. HDB undertakes duties from housing production, housing management, and housing finance to formulation of housing policies.

The HDB is the sole authority to implement and control public housing production and management initiatives, financing measures and subsidies as well as specific programs and policies. The public homeownership sector is divided into three sub-markets, namely, the new public housing market, the resale public housing market, and the Executive Condominium market.

Since 2002, the allocation of new public housing is based on two main allocation systems: the Build to Order (BTO) Scheme and the Walk-in Selection (WIS) Scheme. The sites launched under the BTO Scheme offer 4-room and 5-room public housing apartments for sale. For the WIS Scheme, on the other hand, is a more convenient and faster allocation system that enables households, particularly those in urgent need of accommodation, to purchase their new public housing, and move into their new homes within three months. (Zhang.X.Q, Grace.W, 2011)

Although the dwellings within the three sub-markets are constructed similarly in high rise high-density developments with 99 years leases, the new and resale public housing are differentiated from each other by the locations, dwelling sizes, designs and ages, and also from the Executive Condominiums in terms of the locations, dwelling sizes, ages and designs as well as facilities and amenities.

Two components clearly reflect the Singapore government’s commitment to housing, that is, the subsidized interest rate for the housing development loans as well as the subsidy in the land prices. The other two components are not as obvious. One is the potential profit that is equal to the difference between the selling price of a new public housing unit and the market price for the same dwelling. The other is the government grant, which is utilized to cover HDB’s annual budget deficit arising from sale, rental and other operations.

There are two types of mortgage financing loans in the public housing market: the mortgage loans provided by HDB and those provided by commercial banks. The mortgage loans provided by HDB are targeted at public homebuyers who qualify for subsidized mortgage loan interest rates. These loans are repayable by the HDB to the government over 20 years at the prevailing CPF savings interest rate. The HDB uses these loans to provide mortgage loans to public homebuyers and charges them at 0.1% above the prevailing CPF savings interest rate, repayable to the HDB over 20 years.

Figure 2: Structure of Singapore Housing System

C:UsersUserDesktopSingapore housing system.jpg

ii) Economic factors that are bound to affect the housing markets.

They have few type of economic factor to affect the housing markets:


Economic growth is dependent upon income, people who with higher economic and rising income will be able to spend more on their house and increase their demand. For the new and resale housing markets they will target the low or middle-income households, the Executive Condominium market aims to provide high quality condominium housing for the middle and upper-income households, and this is basically driven by market forces for the small extent as its prices are subsidized, there are a few restrictions regarding its resale.

Another reason is unemployment; it means the related to economic growth is unemployment. We can see that when the unemployment is increase, then will be able to afford a house. Without employments, people will lost financial ability to make rent and mortgage payments. Therefore, the unemployed cannot occupy any type of residential property.

Interest rates

There are two basic categories of interest rates exist; they are long-term and short-team. Each one has entirely different purposes.

“When the long-term rates rise, so do capitalization rates. They rise for the same reason: fear of inflation and increasing demands on the supply of money. As long-term rates rise, the pricing of real estate acquisition drops by the same ratio, unless offset by a concurrent rise in rents. Conversely, as long-term rates decline, the pricing of real estate will begin to rise. It takes about 12 months for the impact of a rate change to trigger a reaction among brokers, agents, sellers, and buyers. Thus, approximately 12 months after a rise or fall in rates, prices will begin their converse movement.” (ft Editorial Staff,2008)

“Short-term rates are incompatible with real estate ownership since real estate is a collectible. The short-term rate is driven primarily by the Federal Reserve in its fight against either inflation or deflation in the prices of consumer goods, the epitome of short term depreciable assets. The rate charged is highly volatile and does not factor in the rate of inflation, nor is a change in short-term rates reflected in the pricing of long-term mortgage rates, real estate ownership, or rents.” (ft Editorial Staff,2008)

After all we can see that when the interest rates are low, buyers can give more to pay for houses and prices across the market tend to rise. But if the interest rates are higher, buyer cannot afford to make larger payments and end up lowering their prices. So when the market interest rate is decrease, this tends to slowly raise the price of housing.

Gas Prices and Road Tax

Gas prices can have a direct effect on the values of house. Low gas prices mean people can afford to commute to work from long distances so they can have a bigger house. If gas prices increase, people may want to move closer to the city. Therefore, prices in these suburbs decline and it has a ripple effect on the rest of the market. Besides that, road tax will also impact of personal economic problems, because in Singapore this is one of the major part of the overhead.

Consumer Confidence

Confidence is a very important for determining whether consumer want to take the risk of taking out a mortgage. An especially expectation towards the housing market is important; if consumer fear house prices could fall, they will defer buying. Therefore, when consumers are confident in their economic circumstances and the stability of the housing market, they’re more likely to make a purchase.

iii) The importance of housing market to the economy.

The housing market has a high profile. The number of people who have a direct stake in this market has increased. In consequence the housing market has grown from being of great economic, social and political significance.

There has a few type of focus discuss about the importance of housing market to the economy:

Employment opportunities

When more foreigners to move to live in Singapore, the housing market is the first important part to them. This is not just to promote the economic sources; it also can promote more employment opportunities. The inhabited places there will be the operation of the economy. Consumer likes to pursue a good supply and demand, so they will increase the demand to make their life much better than before. Therefore, when they buy what they need, while promoting economic exchanges. This will lead to other companies to hire more staff members to service these consumers.

General Price level

There are different types and different price of housing in Singapore. If you are looking for a “price” to represent the price of all items, that is call “price level.” With the passage of time, the price will rise or fall, so that the average price level will have a chance to change. Assuming a housing area in the next few years, rising prices, then the money will earn more.

National income and output

A diversity of measures of national income and output are used in economics to estimate total economic activity in a country, including gross domestic product (GDP), gross national product (GNP), and net national income (NNI). To know a country that how wealth or poverty, you can see the level of national income. Has been a lot of economists are through the comparison the national income between a countries with another countries, to measure the economic capacity national performance. Housing market is the one of the important part of Singapore income.

Attract foreign investment

A country with good housing market will show the foreign investors a good impression; it will attract more foreigner invest to those houses. Singapore is a strong national economy; it is also a rapid technological development of the country. Seven consecutive years, was selected as the most liveable city in Asia, with its low tax regime, bilingual education, a comprehensive welfare system, and a stable political environment to attract global investors’ immigrants living in Singapore.

iv) Direct and indirect economic impact of housing.

When the country’s economy began to increase, as a same time it will also increase in wages and salaries represent a direct increase in incomes and are likely to stimulate demand for a higher standard of housing from individuals. This will lead to an increase in the number of transactions in the housing market.

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Indirect increase can have an identical effect on incomes as direct increase in wages and salaries. For example a reduction in the level of income tax effectively increases incomes and can increase demand for housing. Cuts in interest rates enable people to take out larger loans and so effectively increase income. Conversely an increase in interest rates has the effect of cutting income, and reducing the demand for housing.

Employment opportunities

This can also directly increase employment opportunities, to allow more people want to come to work in Singapore. It will also indirectly enhance the reputation and prosperity of the country. As the same time, it will attract more investors to come to invest in Singapore.

General Price level

For the general price level will directly to represent the price of all items of the housing. But for the price will indirect to raise or fall with the passage of time, so that the average price level will have a chance to change.

Interest rates rise directly affect real estate prices

The real estate prices is a concentrated expression of the real estate market situation, the majority of funds from bank loans for real estate development, the level of interest rates directly affect the cost of real estate development and its profit. As external factors, changes in interest rates is bound to the funds invested huge real estate investment is large, therefore, changes in interest rates on real estate prices play a regulatory role.


When a country’s economic earning more, it will directly affect the prosperity of the local economy. This is also indirect local to be able to have more development. When people’s income is getting better and better, more people will make in their house requirements. Therefore, they are willing to pay to decorate or to buy a house.

v) Recommendation/suggestion to improve housing system.

Affordable Housing in Singapore

Housing is infrastructure, and investing in affordable housing, by new development, acquisition or renovation contributes to the economic health of communities, the province and the nation through construction, the buying of goods and services and the reduction of costs in other service areas.

Any funding programs need to be flexible to address local issues. New construction is important in other areas, but so is the ability to renovate existing market housing to preserve and improve affordability.

Fast-track the development of the Singapore Affordable Housing Strategy

The recently released Provincial Poverty Reduction Strategy acknowledged the importance of affordable housing as an effective way of reducing poverty and of building healthier and more vibrant communities. The government should undertake the development of a comprehensive provincial Affordable Housing Strategy that addresses the role of housing in the full range of policy areas.

Of equal importance is the development of local housing strategies that can link together policies and programs in all service areas to ensure a more joined-up approach to service delivery.

Besides that, it can build on the Success of the Affordable Housing Program. When we keep moving, we will see that there is an urgent need to create new housing opportunities by building new rental homes, to help homebuyers for their first time, rebuilding social housing communities or housing benefit initiatives, or providing rental assistance.

Inclusive communities are healthier

Governments need to make a more perfect and more comprehensive approach to housing because of the role that housing plays across a program areas and wide range of policy, especially long term care and health. Economic benefits housing is essential for successful economic development and increased employment. Supports to help people live in the place are more cost-effective than building new institutional housing. At some country, some of the public investment in social housing is being lost because existing policies limit the ability to make best use of the housing stock, and approaches to health and social programs remain fragmented, ignoring or duplicating the significant assets that already exist. Provincial policies across all program areas need to be driven by “joined-up” outcomes across Ministries, and where necessary, across jurisdictions, and resources targeted appropriately.

Take advantage of technology

We can use all forms of electronic communication to your advantage. Build a website, advertise online and contact to your customers through social media. More and more consumers are looking to make purchases online; this is an important marketing opportunity.

Preserve the existing market housing stock

Funding for new development is important, but lower cost market housing is being lost across the province due to conversions or just increasing costs to put units into the market. Allowing acquisition of existing housing as long as it is converted to long-term affordable housing should be allowed. Provincial tax regulations could assist with this process by reducing capital gains or providing other tax-based incentives to encourage long-term preservation of existing affordable housing stock. In general, providing funding that can be used to meet local needs and opportunities rather than program specific criteria would enable communities to maximize the outcomes of these important investments.


Inform salesman himself about technological developments and other trends in their industry. Make sure that the business is staying on top of the latest advancements, and make sure that the marketing conveys this fact to the customers. Demonstrate your commitment to staying on top of the latest trends in the market.

vi) Conclusion

Singapore’s housing market was active globally as Singapore has a perfect and systematic project line. A lot of resources were there naturally that to provide better services to consumers. In Singapore, there is no such thing as homeless people as poor or wealthy people are able to buy a house.

Therefore, investors are also very reassuring to invest in Singapore. The perfect equipment and environment to attract more people came to live in Singapore. It also indirectly makes Singapore become one of the most prosperous countries.

People are willing to invest in Singapore as there are relatively corruption-free and transparent, stable prices, low tax rates. This makes the investor feel valuable, security and safety to invest into Singapore market.

In my case study, we can see that Singapore’s economy well into the cause of many aspects of the development such as employment opportunities, high standard of living and etc.


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