In news report of the recent parliamentary sitting, Min(MND) Khaw Boon Wan defended the Executive Condominium scheme by saying, I quote, “It is really a wonderful scheme. It protects middle income Singaporeans from competition and ensuring a very market friendly way of allowing them to buy condominiums at very affordable prices. If I may give an analogy – it is like offering you a Lexus at a Corolla price – but only Singaporeans have this privilege for doing so. And they know that in due time the price will go up to Lexus or above Lexus levels. So I think it is a very good scheme.”
Ministry of National Development, you have got your facts wrong and have shown that you are out of touch.
First, households who have $10,000 – $12,000 monthly income who buy executive condominiums can hardly be classified as “middle income”. According to Singstats, these households are in the 65-75 percentile (see page 11) of all households in Singapore. The median household income in 2011 is $6,307 (see page 6). Executive condominiums form about the top 20% of all resident households in Singapore (see page 9). In what sense are these people in households who earn $10,000 – $12,000 considered “middle-income”?
Second, the subsidies that the government gives when it prices the sale of the land of executive condominiums below market prices does not directly accrue to these households. In reality, the subsidy is directly passed on to the developer who bids for the land and then sells the executive condominiums to buyers at prevailing market rates, earning a profit from the subsidy. Buyers only indirectly benefit from the land subsidy if the prevailing market rates for executive condominiums are substantively lower than the prevailing market rates for normal private condominiums. To put into motion Khaw’s analogy, it is as if the government has built a Lexus and sells the Lexus to the car dealer at a Corolla price. The car dealer is then free to earn any amount of profit above that Corolla price for that Lexus car depending on the market for luxury cars.
Third, even if the subsidies of the government do benefit the $10,000 – $12,000 monthly income households, what business does the government have in providing subsidies for this group of people who are substantially more well off than the rest of Singaporeans? How much subsidies from the subsidized various land sales are we providing for this group of Singaporeans, versus the subsidies we are providing for low-income Singaporeans when HDB builds rental flats? It is not clear.
I think the people in the Ministry of National Development should wake up soon.