TL;DR – How to safeguard ourselves then?
Singapore is an expensive place to live in. Two things contribute significantly to the high cost of living – housing and transport (especially private transport). Recently, two developments have gotten Singaporeans worried that the costs of housing and transport will shoot up very soon. The first is LTA’s announcement that Singapore’s vehicle growth rate will be cut to zero. The second is the surge in en bloc sales.
These two issues were addressed in Parliament.
Surge in en-bloc sales and property prices
Minister for National Development Lawrence Wong pointed out that the surge in en-bloc sales was due to two factors – more developers are keen to replenish their land banks, and the effect of successful sales the year before. Notwithstanding this surge, the surge in en-bloc sales may not lead to rise in property prices. Minister Wong explained why that is the case.
The price that the developers can sell their units depend on demand and supply of the property market at that point in the future. The developers are subject to the Additional Buyers’ Stamp Duty (ABSD). They have to build and sell their units within five years of award of the site. That means that all en bloc units will be redeveloped and put back into the market, increasing the supply of property in the market. As a result, by the time these developers who bought the en-bloc sales will face some pressure to sell at a reasonable price.
Furthermore, if necessary, the government increase land sales. Minister Wong highlighted that the government takes into account the overall supply of property, population and income growth, and property market conditions when deciding the quantum of land to be put out for Government Land Sales (GLS). If necessary, the government can take the appropriate actions to maintain a stable and sustainable property market.
Put together, it’s unlikely hat the surge in en-bloc sales will lead to a rise in property prices any time soon.
Zero vehicle growth rate and COE prices
Senior Minister of State for Transport Lam Pin Min told Parliament that the decision to curb the car and motorcycle population in Singapore will not affect Certificate of Entitlement (COE) prices “significantly”. He explained that the COE quota is largely determined by the number of vehicle de-registrations. According to figures by LTA, about 93,100 cars will be due for deregistration next January.
Dr Lam also highlighted that the government has invested heavily to build up its public transport system. This could go some way to reduce the need to own a car. That said, there are worries that LTA’s objective of creating a car-lite society might lead to increased in business costs, which might be passed on to consumers.
To that, Dr Lam replied that the decision to maintain the growth rate for Category C until early 2021 will provide companies with more time to improve efficiency. Furthermore, an urban logistics task force comprising of members from various agencies was convened last year to develop a more efficient logistics system in Singapore. An example of what the task force has come up with is the development of a “federated locker network” to improve the distribution of goods from businesses to end consumers. Dr Lam also added that the government is mulling other innovative ideas, including the deployment of drones.
Put together, it’s unlikely that LTA’s measure to bring vehicle growth to zero will result in significant increase in COE prices.
Best way to guard against increase in cost of living is…
If wages grow as fast, if not faster, than the increase in cost of living, then the increase in cost of living will be more bearable. In other words, while it is important for us to keep the increases in cost of living in check, we also need to think of ways to grow our income.
Fortunately, it seems that the economy and the labour market is picking up. In parliament, Minister for Manpower Lim Swee Say pointed out that the proportion of locals being added to the pool of PMETs has also grown while the real incomes of workers who are in full-time jobs have risen. That’s signifiant because real income takes into account inflation.
To some extent, the government’s Adapt and Grow programmes contributed to those improvements. In the first eight months of this year, Adapt and Grow programmes helped more than 16,000 workers land new jobs. 58% of those are PMETs.
Moving forward, schemes such as the SkillsFuture Series will help working adults learn industry-relevant skills in eight areas related to the industry transformation maps. But such schemes would only be useful if Singaporeans are willing to take the time and effort to “adapt and grow to stay relevant and seize new opportunities.”
If we can do that, then we should be able to cope with the gradual increase in cost of living perhaps.
(Cover image via)