When property meets politics
by admin , March 16, 2010, 1645hrs
By Loh Chee Kong
cheekong@corporateobserver.com.sg
The Pinnacle at Tanjong Pagar is not just an iconic 50-storey building – the tallest and most swanky HDB development to date - it is a towering symbol of what happens when property meets politics.
Along with two premium projects at the old Dawson estate, the Pinnacle was an experimental project to rejuvenate sleepy estates - by enticing younger people to move into these developments and allow HDB owners the opportunity to “live in a relatively expensive area in downtown”, as National Development Minister Mah Bow Tan put it when he was on ChannelNewsAsia’s Talking Point programme Sunday.
Mr Mah added that he had to convince his fellow Cabinet ministers of the merits of erecting public housing on the prime plot, instead of putting it up for tender for private residential development – which would maximize the value of the land and generate greater revenue for the government.
Politics won out in the end.
The fast growing and increasingly affluent upper middle-class can now perhaps point to the Pinnacle – and soon, the Dawson premium projects - as a collective symbol of their “stake in the country and its future”, borrowing HDB’s oft-stated objective.
But as the government continues to expand its unique brand of social contract – namely, the public housing programme which is a cornerstone of the ruling party’s legacy - to an increasingly diverse population, the question is how far should it go without compromising the objectives of public housing?
With the Pinnacle flats sold for between S$500,000 and S$600,000 – matching the prices of condo projects particularly those on the suburbs - Ngee Ann Polytechnic real estate lecturer Nicholas Mak pointed out that the HDB subsidy for these buyers would naturally form a lower proportion of the purchase price as compared to buyers of other HDB flats.
Said Mr Mak: “There is no free lunch... the way the government is pricing the HDB flats in the more desirable location higher. The discount given to buyers is lower.”
But as Chesterton Suntec International research director Colin Tan rightly pointed out, there is little reason why the government should be subsidizing these buyers in the first place – only for them to make a staggering profit in the resale market, by virtue of the Pinnacle’s prime location if nothing else, once they fulfill the minimum occupation period.
Said Mr Tan: “If these people could afford these units, then what are they doing in public housing? If they can come up with so much money, then my question is do they deserve help then?”
While the Pinnacle prices set a new high for HDB flats, its units were underpriced – by as much as 50 per cent - compared to comparable private residential developments in the vicinity, according to property analysts who concurred that the 2.5 hectare-site would have fetched a high price if it was put up for tender.
Dr Chua Yang Liang, Jones Lang LaSalle head of research (Southeast Asia), noted the need for “social balance” in policymakers’ urban planning.
The working class should not be relegated to the suburbs, he reiterated.
Mr Mak added the Pinnacle was in line with the government’s policy of integrating “different income and economic backgrounds into a certain neighbourhood” and that there “should be public housing in different districts in Singapore”.
But what makes Tanjong Pagar – or any other estate for the matter – any different from Orchard Road or Raffles Place?
The social argument for carving out public housing precincts within downtown prime districts – a sound policy in other developed countries - is less compelling in Singapore.
While urban sprawl – or the spreading outwards of a city to its outskirts– is a natural phenomenon, it only becomes a problem when there are inadequate amenities for people living on the fringes and a lack of transportation nodes to the city – issues that are alien to Singapore given its small size and well-developed infrastructure.
If social objectives are indeed the key consideration, a more egalitarian - and more efficient – approach would be to maximize the value of the land and redistribute the revenue through social spending.
Said Mr Tan: “The money will go back into the public sector and everyone will benefit. In this case, given that there is a (blanket) subsidy, how does the government select and decide who qualifies?”
The government has said that the Pinnacle and the two premium projects at Dawson will be the exception rather than the norm.
The overwhelming demand for these projects is not so much a vindication of a policy that makes bad economics sense.
It merely reiterates Singaporeans’ eye for a bargain - and little else.
- additional reporting by Samantha Kudus
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