Since the Covid-19 pandemic erupted, house prices the world over have gone through the roof. A global index of home values produced by Knight Frank showed that the average price of a home in 56 countries and territories increased 10.3 per cent last year, with nearly half the markets tracked registering annual price growth of more than 10 per cent. Among the Asia-Pacific economies, Singapore had the third-fastest growth rate after Australia and South Korea. Private residential prices rose 10.6 per cent in 2021, data from Singapore’s Urban Redevelopment Authority shows. The pace of the increase was strong enough for the government to introduce another round of restrictions aimed at averting a destabilising correction. Among the steps announced in December last year were additional stamp duties for second-home buyers and foreigners purchasing property , and a tightening in borrowers’ debt service ratio threshold. However, the measures to dampen demand were far more modest in the segment of the market where the price increases have been the sharpest. In the secondary, or resale, market for government-subsidised apartments, prices rose 12.7 per cent last year, with transactions up 25.3 per cent, according to the Housing and Development Board (HDB), Singapore’s public housing authority. Not only did the average price of an HDB resale flat surge to a record high, bidding wars broke out for some of the most sought-after properties in prime locations. At the upper end of the market, 259 apartments changed hands for more than S$1 million (US$730,000) last year, up from 64 in 2019, data from property adviser OrangeTee & Tie shows. Last month, a five-bedroom apartment at the Pinnacle@Duxton, a landmark 50-storey, seven-tower development next to the central business district, was sold for a jaw-dropping S$1.39 million, the highest price for a government-subsidised flat. How would Lee Kuan Yew have solved Hong Kong’s problems? That the property in question is in a redeveloped estate that was built in the 1960s, under Singapore’s founding prime minister Lee Kuan Yew to provide rental apartments for poor families, was not lost on the city state’s real estate press. Earlier this month, Stacked Homes, an online platform, said in an editorial that it was “a little ironic that a project to commemorate housing for the needy is now housing for the more affluent”. Concerns about affordability in Singapore’s public housing system – long admired for providing safe, clean and spacious apartments that house 80 per cent of Singaporeans, the vast majority of whom are owner-occupiers – are becoming more acute. In the first quarter of this year, prices for HDB resale flats grew 2.4 per cent quarter on quarter to a fresh high, compared with a 0.7 per cent rise in the private residential market, which is cooling partly due to new restrictions. Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said the pace of the price increase in the public housing market was “quite remarkable given all the global uncertainties right now”. Why Hong Kong cannot copy Singapore’s public housing success However, some sense of perspective is in order. For starters, the HDB resale market was in the doldrums for much of the previous decade, with prices falling more than 10 per cent between 2013 and 2019. The combination of a slew of measures to stimulate demand and severe pandemic-induced delays in the construction of new, build-to-order apartments has helped drive up prices. Second, million-dollar transactions, while making for splashy headlines, account for a tiny fraction of public housing sales. Even among mature estates – residential areas that are more developed and equipped with better amenities and transport infrastructure – the average price of a flat last year stood at S$547,908, data from OrangeTee & Tie shows. Third, several factors are conspiring to restrain the growth in prices in the HDB resale market. The government is about to ramp up supply sharply, increasing the number of build-to-order flats to be launched by 35 per cent in the next two years. The additional 23,000 new apartments due to be launched this year, some in popular locations in the city centre, will absorb some of the demand in the resale market, helping slow the pace of price increases. Moreover, lower- and middle-income Singaporeans, who make up the bulk of the buyers of government-subsidised flats, will become more cautious due to the steep rise in the cost of living. Hongkongers and Singaporeans lock horns over London properties Fourth, and most importantly, Singapore’s public housing system remains a model of successful urban development. Not only has it delivered relatively high-quality tower blocks in one of the world’s densest countries, it continues to provide more affordable public housing than in many other advanced economies. The government is acutely aware that million-dollar price tags for HDB flats cannot be allowed to bring the system into widespread disrepute. Last October, it introduced the prime location public housing model aimed at deterring speculative demand for new HDB flats built in popular districts. While Singapore’s brand of public housing is quite different, not least because the state owns 90 per cent of the country’s land, there are lessons that other countries should heed. The most important is the need to address the surge in house prices through adequate supply of affordable and decent homes, as opposed to relying on measures to curb demand. Singapore’s public housing system is by no means perfect, but it plays a vital role in assuaging concerns about runaway prices in one of Asia’s most buoyant property markets. Nicholas Spiro is a partner at Lauressa Advisory