Singapore: Even Their Problems Are More Efficient

Posted by Kathleen McCaffrey Saturday, January 15, 2011 at 12:31pm 3 Comments

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One of my favorite city/states, Singapore (second only to Athens circa 350 BC…), was in the news the other day because of it’s large increase in property value. As the WSJ reported:

“Previous government measures have to some extent moderated the market, but sentiments remain buoyant,” Singapore’s Ministry of National Development, Ministry of Finance and the Monetary Authority of Singapore said in a joint statement. “Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.”

To quell this, the government will be making individual buyers with outstanding loans put up more cash (allowing them to borrow as much as 60% of the property’s value), increasing the holding period for the imposition of seller’s stamp duty to four years from three years, raising the rate of duty for homes sold at various stages during the holding period, & limit loans that group purchasers are allowed to take of a residential property’s value.

According to latest government data, the increase in private home prices in the fourth quarter slowed to 2.7% from 2.9% in the third quarter. For 2010, private home prices rose 17.6% while Singapore’s economy grew 14.7%, the fastest expansion since the city-state’s independence in 1965.

This is, of course, a consequence of having the Central Provident Fund (CPF), a compulsory comprehensive social security savings plan which has led Singapore to be one of the countries with the highest rate of savings. Also, in Singapore the money is actually being invested, as opposed to being put into an elaborate Ponzi scheme. Everyone is forced into this program, though, and one of the few measures one can make that is immediately profitable, without waiting to benefit from the savings plan, is to invest in real estate. As such, one can imagine that real estate in Singapore always dances the line of a bubble.

Eh, at least it was created by being forced to save — not forced to give out mortgages.

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3 Comments

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Deekaman | January 15, 2011 at 2:20 pm

The CPF, although I admit unfamiliarity sounds like the type of program we should have here in the US. I see it something like this:

– If you are over the age of 50, you stay in the current Social Security Program

– If you are between 30 and 50 you can stay in the current program or be given a lump sum based on your contributions and allowed to enter into a CPF-type program (well call it US Retirement Fund – USRF). The lump sum rolls into the USRF.

– If you are under 30, you go into the USRF, with the same lump sum payout..

USRF investments must have a certain percentage in government bonds, a certain percent in "safe" investments and a certain percentage can go anywhere the investor wants. There will obviously be shortfalls in Social Security and will have to be covered by the general fund. But we'll be doing that anyway, so it's not really a "wash", but it will feel that way.

Kathleen McCaffrey | January 15, 2011 at 3:54 pm

I agree! I think that's really close to Paul Ryans proposal. My point was that, they have problems, but at least they're borne out of better habits.

jackiemsydney | January 22, 2011 at 9:40 pm

Typo in the first line, professor – "it's"=it is; it sb "its" 😉

Singapore: Even Their Problems Are More Efficient

Singapore: Even Their Problems Are More Efficient

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