Rafe Fletcher: Statist Singapore builds homes whilst statist Britain just plans

Rafe Fletcher is the founder of CWG and writes The Otium Den Substack

You can regularly eat and drink for free in Singapore.

Just turn up at one of the British property seminars that pepper the city’s function rooms. Developers and agents swallow the cost of a few freeloaders because it has been a fruitful market. Singaporeans are the second largest group of foreign home owners across England and Wales.

Demand isn’t spurred by colonial nostalgia. Rather, Singaporeans can buy a second home in Britain with far less hassle than in Singapore. And developers welcome the liquidity lacking in those supported only by a British-earned income. Just as a punitive tax regime leaves British buyers short of a deposit, so builders find construction can leave them short of a profit once they have navigated nebulous planning diktats.

Confronting the resulting housing bubble may look awkward for the Conservatives. Even in 2024, 37 percent of outright homeowners voted for them, a 12-point lead on Labour in second place. But the consequences of ducking the issues are starker. Those homeowners will see values deplete anyway under Labour’s trajectory of making everyone poorer. And the Conservatives will make no inroads with a generation shut out of the housing market.

It’s a lesser problem in Singapore where 90 per cent of citizens are homeowners. A product of mass public housebuilding under the Housing and Development Board (HDB). Only Singaporeans are eligible to buy these properties. Buyers draw upon their Central Provident Fund (CPF), a forced personal savings system to put down a deposit on HDBs’ subsidised values. Mortgages are offered with fixed interest rates of 2.6 per cent.

The HDB market is heavily restricted. They can’t be purchased by non-citizens and Singaporeans can only own one unit at a time. Re-sales are prohibited for five years, so there’s no “flipping” on the back of sudden value increases. If Singaporeans want to buy a second home, they must enter the fully private market, which constitutes just 20 per cent of the country’s housing stock. Doing so incurs 20 per cent stamp duty on any second property and 30% on additional ones after that.

Hence why buying in Britain is much more attractive where non-resident stamp duty is only two percent. With far lower tax rates and HDBs available at 3.8 times average income, Singaporeans have the means to buy British stock. Penalising such foreign buyers may play well optically. But as it is, they’re vital in getting homes built. Britain’s largest developer Barratt Redrow recently blamed a lack of them for missing its sales target. International capital helps developers meet affordable housing provisions under Section 106 of the Town and Country Planning Act. Without buyers for higher-price units, the think-tank Onward reports that the cost of delivering new homes often exceeds their capital values.

Section 106 is one of many regulatory hurdles strangling supply. Onward’s research shows that small and medium-sized (SME) developers have been effectively priced out of the market. In the late 1980s, SMEs delivered about 40 per cent of new homes; by 2007, 30 per cent; and today just 12 per cent. They don’t have the scale or balance sheet to weather the costly and cumbersome planning permission process.

Mired in such regulation, Britain’s housing policy is hardly less statist than Singapore. But that statism resides in obstructiveness instead of forcefulness. Singapore can build because the state owns 90 per cent of the land (HDBs and most private housing are on 99-year leases). A situation engineered through the Land Acquisition Act of 1966 that empowers the government to buy any land it wishes at current market value. It is frustrating for golfers as the city-state’s few remaining courses are forcibly purchased to make way for new housing. But it gives the government total control over the supply-chain and costs.

A similar land grab is probably only contemplated by Zack Polanski in Britain. And it’s more likely to resemble Zimbabwe if it comes under the Greens. But there are other lessons Britain can learn from Singapore.

Firstly, provide tax-free incentives for young people to save for a house. Robert Colville writes in The Times that Brits with student loans are paying 50p in tax from every pound they earn over £50,000 and 71p over £100,000. Getting a deposit together is often hopeless for even top-earning graduates without help from the bank of mum and dad. Something like Singapore’s CPF would allow workers to save into a specific house-buying account. It need not be compulsory nor state managed. But it should be ring-fenced and explicitly linked to first-home purchase.

Secondly, remove uncertainty. Singapore’s Urban Redevelopment Authority fixes land use, density and infrastructure expectations in advance. Builders operate within known limits. They don’t have to contend with Section 106-esque regulations that leave developers unsure if local housing associations will even buy the affordable housing they’re obligated to provide. Get things built first.

Finally, Britain needs to stop concerning itself with fringe measures that play only to the politics of envy. I recently went to an event at the Seven Palms complex on Singapore’s Sentosa island, an enclave of wealthy foreigners. It had the ghostly feel of many of London’s high-end developments, with owners mostly in absentia. We may criticise the atmosphere created by such projects but they’re incidental to the wider problem. It’s virtue signalling rather than serious policy.

Britain’s housing crisis is not unique amongst developed nations. But alongside an acute supply shortage, it faces weakening demand. If the most talented young people don’t believe there’s a realistic route to buying, they will leave. And house prices will fall anyway while the country gets poorer. Fixing things now may unsettle Conservative voters who sit on high paper valuations. But a reckoning will come anyway. Perhaps those free evenings out in Singapore will start to dwindle.

Singapore shows the benefits of a government that acts forcefully. Britain shows the consequences of a government that meanders – forcing risk onto developers, disincentivising building and earning, and pandering to NIMBYism. Noel Skelton’s property-owning democracy was once an inspiration to a young Lee Kuan Yew.

The Conservatives need to reclaim that legacy to feed aspiration rather than resentment.