Remember the sweet siren calls of asset enhancement?
The abstract for the paper "The Impact of Housing Prices on Aggregate Consumption: Evidence from an East Asian City-State" by Phang Sock Yong states clearly that "there is no evidence that housing prices have produced either wealth or collateral enhancement effects on consumption."
There is no need to dwell too deeply into the esoteric academic references to appreciate what we experience in real life. Since CPF "liberalised" the use of the retirement funds in 1980, housing stock is four-fifths HDB, and home ownership is in excess of 90 percent. All this is supposedly good news except that cash was diverted from other necessary expenditures, resulting in the unique Singapore position of being asset rich, cash poor.
The research found that, regardless of the definition of consumption expenditure or disposable income used, the ratio of total consumption expenditure to GDP less personal and corporate taxes fell from 0.59 in 1979 to 0.44 in 1999. Under the myopic hypothese, consumption should track income/wealth movements and respond correspondingly to income/wealth increases and decreases. So where did all that wealth generated go to? Definitely not to the average HDB owner, struggling with a 30-year mortgage repayment schedule.
Phang has an explanation for the negative impact of housing price increase on aggregate consumption: The negative wealth effect of house price increases (on those seeking to upgrade or enter the housing market) is stronger than the positive wealth effect of those seeking to downsize their housing assets (presumably to cash out for retirement needs). In Aesop Fable terminology, those chasing the elusive pot of gold may not realise that at the end of the rainbow, the pickings are not that attractive. The paper concludes with this recommendation, "asset enhancement" polices should make a distinction between price increases for housing vis-a-vis other financial assets. Think twice about before betting big on your house, especially one built by HDB.