The suggestion that a government can arbitrarily decide on land value is a dangerous one

Let’s be clear.

To begin with, the HDB does not price new flats based on costs, nor development or land costs.

That much the Minister for National Development Desmond Lee has stressed.

So the argument over how land should be valued is moot because land cost does not come into the equation.

 I suspect some are just using land cost as a distraction to deepen the angst of home buyers.

 While land cost is not a consideration when pricing a flat, land cost is a cost to HDB.

This is why it burns a big hole in HDB’s budget and causes a deficit.

Land value

Second point.

The land is part of past reserves.

When we talk about the size or value of past reserves, obviously we are talking about their current value.

That’s the most accurate representation of the size of our past reserves

So when people talk about the value of land, it’s the current value that is meaningful, not what it was valued at 30 years ago, or what its value will be 10 years from now.

Suppose you bought a property in 1965 and paid $10k for it. Today, if you want to use your property as collateral for a loan, you will be horrified if the bank tells you the value of your property is what you paid in 1965.

So you see, the appreciation of your property represents real money.

Similarly, the appreciation of the value of land represents real money.

It’s not accounting sleight of hand when land that was bought for $1x in the past now has a value of $10x. It’s really very simple and straightforward.

Accounting sleight of hand looks like this!

Now, let me show you what accounting sleight of hand looks like.

Here’s a hypothetical example.

The fair market value of a parcel of land is $10x million.

At this price, it causes HDB a deficit.

Someone says: let’s just put the price of land at $1x instead of $10x.

Tada! The deficit is gone!

That, my friend, is accounting sleight of hand.

And that seems to be what some people, critical of HDB paying fair market price for land, are suggesting that HDB should do.

The suggestion that a government can arbitrarily set a value for land is dangerous!

Third point.

The suggestion that a government, by virtue of the fact that it is government, can arbitrarily set the price for land they are going to buy to use, is a dangerous one.

It makes for non-transparency and therefore little accountability.

Why non-transparent? Because there is no benchmark. It is priced arbitrarily. It can be any price.

And non-transparency leads to little or no accountability and paves the way for corruption when less-than-honest people are in charge.

Rules are there to protect!

Rules are there to protect past reserves.

The government of the day does not own the land. They are custodians of the state’s wealth.

If the government wants to use land, it must pay for it at fair market value, just like anyone else.

And this is what the present PAP government is doing, applying to themselves the rules they apply to others.


On Key

Related Posts