HOUSING FINANCE IN SINGAPORE AND HONG KONG

Abstract

Both the Singapore and Hong Kong governments administer public housing programmes which are considered extensive by international standards. In 1993, 87 per cent of Singapore's population resided in public housing. By the end of March 1993, the proportion of Hong Kong's population living in public housing was 49 per cent.

However, the home ownership rate is considerably lower in Hong Kong as compared to Singapore. In 1994, Singapore's home ownership rate was 92 per cent. In Hong Kong, the home ownership rate was 43 per cent in 1991.

This thesis provides a comparative study of the housing finance systems in Singapore and Hong Kong. It is observed that the higher home ownership rate in Singapore is partly due to the favourable price and mortgage affordability of public housing. Also, income ceiling restrictions have been utilised in public housing to promote home ownership in Singapore, but not in Hong Kong. Futhermore, a system like the Central Provident Fund (CPF) encourages home ownership as CPF savings can only be used for housing purchases but not rent payments. However, it is noted that the availability of CPF savings for housing finance may have led to over-consumption/investment of housing in Singapore, and greater than optimal resources being devoted to housing to cater to that demand.

Ample finance (on both the demand and supply sides) and ready access to land (together with supporting legislation) appear crucial for the success of any housing programme. To successfully implement a compulsory savings scheme like the CPF as a source of housing finance, there must be rapid economic growth, and a clean and corruption-free government.