THE EFFICIENCY & EQUITY IMPLICATIONS OF HDB SUBSIDIES ON THE PROPERTY MARKET

Abstract

By the early 80s, the government had already fulfilled the basic housing needs of its population. Since then, HOB has engaged in the provision of better quality housing for the middle-income group. As a result of this, the differentiation between public housing and the private property market has narrowed over the years. In fact, potential buyers of the lower-range private housing come from the higher-end of the public housing (i.e. those from executive flats). With this growing interdependence between the two housing segments, the objective of this dissertation is to examine the equity and efficiency implications of housing subsidies on the property market. Thus, the focus is on HOB subsidies as a mean of government intervention in the housing market. The motivation behind this thesis is to show that any discussion on the policies of housing subsidies is incomplete without including the analysis of the private property market. This suggests that in the implementation of housing subsidies such as, the pricing and supply of executive flats, the liberalisation of CPF housing finance schemes and the introduction of a housing voucher, both the public housing and the private housing markets need to be considered simultaneously. Finally, with this overlapping nature of the housing segments, this may suggest a role for HOB subsidies in the private market. If the right type of policy is implemented at the right stage of the property cycle, the housing subsidies may prove to be effective tools to regulate the property market. Otherwise, these policies will have severe repercussions on the property market.