THE OUROBOROS TRAP OF PUBLIC LAND SALE'S MODEL IS WHY SINGAPORE IS WORLD'S MOST EXPENSIVE CITY

Once upon a time there was a man called Mr Lee. He owns 90% of all the rice in the market. Lee saw there were a few boutique grocery stores that own the other 10% of the market who were prospering by selling at much higher prices. These small shops set high prices because:
* they hold limited stocks,
* they cater to premium customers,
* they want to maximise profit.

Lee knew about all those supply-demand gobbledygook he learnt in economics class. With huge supply, he can sell cheap and still make profits on low margins compensated by volume.

Instead of using his huge stockpile to lower prices which ensures the lower income can afford rice, he thought:

"I'll price my rice just like the boutique shops because that's the market price. This ensures fairness and prevents devaluing the rice."

So the price of rice sold in his supermarket goes up, even though Lee has plenty of it. The boutique owners are thrilled because now they can increase their own prices for the wealthy customers.

Meanwhile, the lower income families struggled to buy a basic bag of rice. They thought: "C'est la vie. If I don't buy rice now, I'll never be able to afford it later." And so they grudgingly accepted the new normal.

What about Mr Lee? Well he understands from his economics class about elasticity that measures how sensitive a product is to changes in prices. As rice is a staple, it is inelastic, that is, less sensitive to price increases. He was delighted the boutique shops reacted to his price increase by increasing their boutique prices. Lee thought well, the market prices have increased, therefore I will have to adjust my prices upwards again.

My smarter readers may have understood the story of Lee Supermarket and know where I'm headed. For those who do not understand, this is my pseudo-economist's primer on what ails the Singapore economy. It is a perspective that has never been articulated by any Singaporean, not the least in academia.

Cost-of-living continues on it's upward climb and Singaporeans do not understand the explanations of the government. "The demographic has shifted. The population is growing older and we need to manage higher welfare and medical costs, blah blah blah." Many reasons have been given for the rising cost, but in my humble opinion, no one has explained the quagmire of the Singapore economy.

In order not to be fooled, you need to understand the difference between a "non-structural economic problem" and a "structural economic problem". A non-structural problem is a cyclical problem caused by economic downturns. This is temporary in nature and can be solved by fiscal intervention such as stimulus, rate cuts, temporary subsidies. High unemployment during the Covid-19 shutdown is an example and CDC vouchers etc is a fiscal solution. Structural problems are different. All countries struggle with some structural problems. Most of these problems have commonality across the board, some are rare. Singapore similarly has a few structural problems but we have a problem that is unique only to this little island. It is this unique structural problem that is the focus of this article.

Structural problems are more difficult to overcome. It requires reforms. Sometimes the medicine is extremely bitter with huge political consequences. That is why governments are not wont to take action. 

First, let's take a look at the performance of SGD vs the currencies (31 Dec 1990 vs 21 Jun 2025) of the top countries that we import our goods from:

ccy pair	1990	2025
SGD/RMB	2.9984	5.5851
USD/SGD	1.7400	1.2850
SGD/MYR	1.5478	3.3093
SGD/KRW	413	1,064
SGD/JPY	78	113
SGD/IDR	926	12,765
EUR/SGD	2.38	1.48
SGD/AED	1.8437	2.8570
SGD/THB	14.49	25.52
SGD/TWD	15.41	22.97
SGD/PHP	12.21	44.49

SGD has appreciated remarkably across the board in real effective terms  This is the outcome of MAS' deliberate use of exchange rate as the main tool to control inflation. A stronger SGD is a deflationary force on imported goods and services. Food imports in SGD terms are stabilised. Electronics and machinery imports are cheaper over time.

We are still exposed to oil and energy, global commodity and shipping shocks but the impact is softened by a stronger SGD.

The overaching appreciation of SGD tells us we don't have imported inflation, it is domestic inflation that is the main driver for the rising cost-of-living in Singapore.

Anomaly of most expensive city in the world but there is no inflation!

Singapore has earned the accolade for the most expensive city in the world in various global indexes. All over the island, Singaporeans complain of substantial increase in prices of almost everything. The government shows the general price level holding steady. The CPI (Consumer Price Index shows 2005-2019 ranged 1-3%, occasionally dipping to zero. In 2020 CPI fell to 0-1% due to Covid-19, in 2021-2022 post-Covid recovery pushed CPI to 6.1%. 2023-2024 CPI eased backed to 2.4%. The average Singaporean who has seen prices rose from 30%-100% on his everyday goods cannot comprehend the official CPI figures. Surely they must have left out certain items, such as rent. Well, rent is included in CPI. But with 90% of Singaporeans living in owned homes, accommodation costs for the purpose of CPI is imputed. This is a nuanced and subjective input by someone.

The MAS, who has responsibility for managing the general price level, computes the core inflation figure. This computation ignores accommodation and private transportation costs which are more volatile due to external shocks. The core CPI is more reflective of domestic pressures on inflation. The core CPI tends to be lower. Core CPI : 2005-2019 : 1.2%, 2020 : 1%, 2021-2022 : about 4.1%, 2023-2024 : 2.7%.

The lower core CPI inflation figure, which ignores accommodation and private transportation costs, is what influences major policy decisions  In other words, the two most volatile and the highest cost factors, accommodation and private transportation, are  excluded in various policy decisions.

In the period 2021-2024, ACRA records show business closure totaled 205,305, but new formations outpaced cessations. The government explains away business closures as the challenges of rising wages, AI disruptions, online vs physical presence, new technologies, etc.

In reality, have you heard anyone complaining they close business because of higher wages, or their supply chain cost has gone up, electricity cost has gone up? Or because of inflation? The single complaint of businesses that closed has almost always been RENT!  

What is Rent:
'Rent' in economics is a form of passive income earned because of privileged access, not because of effort or innovation. Examples - 
Land rent is where a landlord earns rental income just by owning a property, 
Monopoly rent is, for example, where a company controls the only telcom network in the country, 
Patent rent is where a company charges  high prices due to exclusive rights.

What is rentier economy:
This is where a large share of national income comes from rent. rather than productive activities like manufacturing, services or innovation.  In a rentier economy:
* Wealth is accumulated through ownership, not creation.
* People or corporates extract income by controlling scarce resources, not by adding value.
A rentier is a person or entity that earns most of their income from owning, not working or producing, example a government that earns from oil reserves.

In this article I want to focus on one aspect of a rentier economy - monopoly rent. Monopoly rent in land ownership is the single core structural problem of the Singapore economy that drives domestic inflation crazy and which the government offers no solution. In fact, the government is the major cause of this problem driven by its land sales policy. 

Private freehold land ownership:
Only 10% of freehold land in Singapore are in private hands, monopolised by
(1) A few large property developers such as Far East Organisation, City Development, Guocoland, CapitaLand, Bukit Sembawang and Ho Bee Land. 
(2) High net-worth individuals and families and foreign investors via trusts or shell companies. 
(3) SME owners (SME founders, doctors, bankers, tech professionals, lawyers, etc) and Professional HENRYs ("High Earners, Not Rich Yet") who are individuals who earn high incomes but haven't accumulated significant wealth. And certainly many of those churned out from the PAP silo.

These are the equivalent of the boutique shop rice owners. 
Group (1) shapes the supply, pricing and land parcel availability.
Group (2) are the generational wealth whose private property holdings reduce further the 10% of private property availability in the market.
Group (3) are the early bird premier customers of the boutique shops.   

Public (State) land ownership:
90% of the land in Singapore is owned by the state through agencies like Singapore Land Authority, Housing Development Board, Urban Redevelopment Agency and Jurong Town Corporation. The government releases land for development via Government Land Sales Programmes. 

And how does the government price the land? Exactly like Mr Lee, the Supermarket operator who owns 90% of rice supply in the market. The land sales programme has pricing tied to private market rates whether in their reserve prices in open auctions, or in their internal sales to JTC, URA or HDB. The state allows the 10% private landowners to effectively "anchor" or "pull up" prices, despite controlling the lion's share of the land. 
The Ouroboros Land Pricing Trap: The government's land sales programme takes into consideration existing market prices and then prices to match. HDP/JTC/URA prices are taken into consideration by the private market which drives their prices higher. Prices of new and resale properties in the private market are adjusted higher. So too the prices of resale private and public properties readjust up. As the overall market recalibrates prices higher, the next next round of government land sales factors in the new price level and again prices to match. This circular pattern of a snake feeding on itself, devouring affordability in the process, tends to perpetuate a rising price scenario. The system feeds on its own rising prices, using them to justify the next rise.

The same scene is similarly played out in the rental market where HDB/JTC/URA are major landlords holding massive inventories.

The Singapore property market is an oligopoly, that is, one of limited competition, shared by a small number of producers or sellers. Just like Mr Lee who holds 90% of the rice supply, the government, having 90% ownership of land, has market power. Which means it is in a position to influence prices.

The greatest anomaly in the Singapore property market is the government, having market power, is a price taker, not a price maker.

In a text-book open-market economy, prices are driven by supply and demand. But in Singapore's real estate market, the government controls the vast majority of the supply, yet it pegs public land sales to private sector benchmarks, effectively outsourcing price discovery to the owners of the remaining 10%. 

Just like Mr Lee who explains the boutique shops' prices are the 'market prices' which he follows, the government professes the same logic. Only the brightest of economists can see the trickery in this. The 'market price' that Mr Lee and the government allude to are inflated by scarcity, speculation, and profit-maximising behaviour of private developers and the other private freehold owners who together controls only 10% of land supply.  It is the 'market price' of the 10%, whose actions are shaped by competition and return on capital, not affordability or social equity. The right market price ought to be shaped by 100% of stakeholders.

The result is a deeply distorted price structure that defies conventional market logic and contributes to runaway land, housing and rental costs. In other words, what we have here is an artificial price structure.

Critically, the government's role shifts - from housing provider to real estate gatekeeper. Land, a public resource, becomes a part of a complex asset-accumulation ladder. Instead of moderating prices in the face of overwhelming demand, the state's hands-off pricing policy allows the private market that controls only 10% of land supply, to set the tone. 

The structural problem of land sales policy:
The bottomline is, the most expensive city in the world earns its title primarily as a consequence of the cumulative impact of high property prices. Property prices impact rental cost which spirals through complex supply chains to hit our pockets in our everyday goods and services. And the spiraling rental cost itself is the result of the Ouroboros trap of our property market. The rising cost is not a normal cyclical problem of an economy. It is a deeply entrenched structural problem that lies in the government's land sales policy.

Structural problems in almost all countries are very difficult to solve. One needs Trumpian resolve to introduce any reforms. If the public land sales policy is not changed, Singaporeans can expect high cost-of-living to be the national staple diet. 

Why public land sales policy will not be changed:

1. Effect on the fiscal engine: Singapore's land sales are not normal fiscal revenue. They are constitutionally earmarked as asset sales with proceeds going into past reserves to be managed by the sovereign wealth funds. They help fund the Net Investment Returns Contribution which covers about 20% of the annual budget. Changing the land sales pricing would reduce future reserves which shrinks investments, in turn lowering future fiscal capacity.  Any reduction in land sales revenue threatens the entire fiscal structure, including how the government funds social spending without raising taxes.

2. Not just a housing policy but a national wealth strategy:  In land scarce Singapore, the government treats it as a strategic national asset, not just a public good. A slow release is to preserve scarcity and long-term value. Selling it high ensures maximum extraction of capital. 99 year leasehold model enables recapture. This model has helped build one of the world's largest sovereign wealth funds per capita. It is also treasured as a yield-generating asset, not a social stabiiliser. To change this doctrine means changing the entire economic operating system of Singapore.

3. Embedded interest of the asset class: This point does not imply or suggest corruption. It is an honest fact to show why there is strong inertia to change because of existence of status quo bias, institutional self-reinforcement, and resistance to redistributive land reform. Singapore's policy makers, by virtue of being long term citizens, senior civil citizens, or high net-worth individuals, are often participants in the asset-based economy. Most own property, often multiple units. They benefit personally from rising land values, as do other rich folks. Many are closely tied to GLCs, real estate firms, or investment entities. This networked and embedded class creates a policy feedback loop where those empowered to reform the system are also beneficiaries of the system. 

4. Land scarcity reform narrative makes reform politically risky: Having successfully cultivated a narrative that Singapore is land-scarce, land value must be preserved for future generation, and undervaluing land erodes national reserves, the government is faced with a problem of arguing against itself. It is politically difficult now to argue for
* lowering land prices for public housing,
* decouple land sales for private benchmarks,
* more aggressive land use for public affordability goals.

5. PAP national social contract:   There is an unwritten social contract of the PAP government with the people of Singapore along these lines :
* CPF-backed home ownership.
* Rising asset values.
* Retirement adequacy through property appreciation.
* Budget surpluses without high taxes.
If the government changes course and makes housing more affordable by pricing land downwards, these are the risks :
* The CPF-housing-retirement loop weakens.
* Household wealth expectations disrupted.
* Government accused of undermining Singaporeans' wealth holdings.
A change in land pricing policy is not just retooling economic strategies, it is a rewriting of the public wealth distribution system.

The land pricing model is extractive and deeply institutionalised. Reform requires more than new policy tools. It demands a renegotiation here of fiscal priorities, intergenerational equity, and the moral purpose of public land.

Conclusion:

What I have laid out is merely scratching the surface of critical tensions in Singapore' s economic model that many do not fully articulate. It is not just a market anomaly, but a structural paradox with real consequences for affordability, wealth inequality and rentier dynamics.

A thousand Leong Munwai's can stand up in parliament and rehash all his points, and all my points, nothing is going to change. Change can only come through the ballot boxes, not from any intelligent discussion of the problems.

Therefore hear ye, all Singaporeans, buckle up for a short ride to a S2.00 cup of Kopitiam coffee

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Note: I am confining my discussion here to how the government's land sales policy is the root cause for the spiraling property and rental prices which is at the heart of our high cost-of-living, why prices of our everyday goods and services have been rising like crazy despite official low rate of inflation. There is much to talk about how the property market is exploited by the government in their extractive policies at the expense of the people. For those who like to pursue this interesting topic, I recommend you go read Kenneth Jeyaretnam, who has interesting perspectives on Singapore's economic stuff.


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