AN ANALYSIS OF THE ROLE OF HOUSING IN SAVINGS

Abstract

Analysing the role of housing in savings is the focus of this academic exercise. The aim of this academic exercise is to establish the relationship between savings for housing and the high saving rates of Singapore, West Germany, and Japan, and to assess the importance of savings for housing in contributing to the high saving rates of Singapore, West Germany, and Japan.In our discussion, we show that savings for housing does contribute to the high saving rates of Singapore, West Germany, and Japan. Since early 1970s, savings for housing is one of the most important factor responsible for Singapore's high saving rates. In contrast to Singapore, savings for housing is not the most important factorbehind West Germany and Japans' high saving rates.This academic exercise is particularly important for lessons drawing.While Singapore, West Germany, and Japan have succeeded in achieving high saving rates, only Singapore is able to, at the same time, attain high homeownership rate. Singapore is probably the single country in the world to be able to achieve high saving and high homeownership rates simultaneously. Other countries may haveachieved high saving rates, but their homeownership rates are relatively low (for example, West Germany and Japan).The Singapore Government exhibits great foresight and ingenuity by building the homeownership policy into its social security scheme, the CPF savings scheme. Singapore's saving and homeownership policies go in tandem with each other. The ingenious mix of housing and savings policies on the Singapore Government's part has the effect of "forcing" Singaporeans to save a large amount for house purchase, thus resulting in high savings and high homeownership rate. Credit must be given to the Singapore Government for its conscious public policy of promoting savings and making homeownership a national goal. The Singapore experiences draws our attention to the need to have a "forced' scheme that earmarks funds for housing, to subsidise the financing and the construction of housing and to provide low cost housing if a government aims to achieve both high savings and high homeownership rate.This type of ingenious policy is absent in West Germany and Japan. Recognising the importance of homeownership in national development, the Japanese and the German Governments have involved themselves in the provision of housing. Unlike Singapore, they do not have a concrete housing policy that caters to the lower income group. This academic exercise draws our attention to the importance of government involvement in the housing market to raise savings and to promote homeownership. The importance of the relationship between saving for housing and the saving rate of a country depends, by and large on the government's ability inmobilizing savings.Future policy makers of developing countries who want to promote homeownership and raise the savings of their countries will find the experiences of Singapore valuable. In future, the success of countries in achieving high savings and high homeownership rate can be attributed to the Singapore Government's originalityin coming up with such a unique saving and housing policies.