2013 NJC H1 Econs Prelim (P1)

This document consists of 11 printed pages; including 3 cover pages. NATIONAL JUNIOR COLLEGE Economics Department [Turn Over] © NJC 2013 ECONOMICS 8819/01 Paper 1 3 September 2013 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your student registration number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use paper clips, highlighters, glue or correction fluid. Section A: Case Study Questions Answer ALL questions. You are advised to spend some time reading through the data before you begin writing your answers. Section B: Essay Questions Answer ONE question. The number of marks is given in brackets [ ] at the end of each question or part question. Start each question on a new piece of paper. At the end of the examination, fasten all your work securely with the cover pages given. Fill in the necessary information on the cover pages. You are reminded of the need for good English and clear presentation in your answers. NATIONAL JUNIOR COLLEGE SH2 Preliminary Examinations for General Certificate of Education Advanced Level Higher 1

Section A Answer all questions in this section. Question 1 Cooling the Public Housing Market Extract 1: HDB resale prices hit record highs, even with supply ramped up The Housing and Development Board (HDB) resale prices have soared to a record high, even as HDB ramps up the supply of new flats to keep a lid on prices. Resale prices went up by 2 per cent - the largest increase since the third quarter of last year, according to latest estimates. This news comes even as HDB is launching more new flats with its Build-To-Order exercises in areas such as Queenstown, Bedok, Toa Payoh, Sengkang and Choa Chu Kang, which will be put on the selling block next month. Unfortunately, it takes time for supply to catch up with demand because of the period required for construction. Source: Adapted from The Straits Times, 1 October, 2012 Extract 2: Second half of Government Land Sales creates more housing and commercial sites The second half of the 2013 Government Land Sales Programme with 11 confirmed list sites and 20 reserve list sites was announced on Tuesday. Together with pending projects, the supply is assessed to meet continued demand for private housing and commercial space. Each year, Urban Redevelopment Authority acts as agent for the State in carrying out land sales, which are earmarked for competing uses such as for commercial, hotel and private residential developments. The objective of Government Land Sales programme is to meet the demand for properties by the private sector, supporting the economic gro wth and implementing key development plans of Singapore. This year, the confirmed list is composed of one commercial site and 10 private residential sites - of which five are executive condominium sites. Source: Adapted from The Straits Times, 25 June, 2013 Extract 3: Property fever – Band-Aid not the cure Seven rounds of property cooling measures later, the market is still lively. There's a need for holistic measures that go beyond loan limits and stamp duty hikes. The previous rounds of cooling measures from September 2009 slapped on additional stamp duty for buyers that sold the properties too quickly to deter speculative demand and tightened home loan restrictions. Thus, home sales dipped immediately after each round. Some buyers even forfeited options to buy, in anticipation of price falls.

But in January, despite another round of cooling measures, the property market rebounded. New private home sales were up 43 per cent in January from December, propelling home sales to more than 2,000 units. This is because some analysts say the underlying demand for property remains strong, explaining the uptick in sales volumes in the last quarter. The biggest factor fuelling property demand is a healthy economy and low interest rates. Many households have am assed cash reserves which can be put down as a deposit for a property. The shallow capital markets here also make property investments the easiest and most accessible avenue for an investor to park his cash to generate returns. Then there are lifestyle ch anges. More single professionals are now moving out of their parents' homes before they are married, creating more demand for homes. While prices are at a plateau, they are still at an all -time high, after recovering 60 per cent from the global financial crisis in the second quarter of 2009. Deputy Prime Minister Tharman Shanmugaratnam said in an interview with Bloomberg in February that "some correction in prices will not be out of order". But rather than more of the same kind of measures - loan curbs o r more stamp duties - analysts say there is a need for a new approach. More rounds of cooling measures centred on loan limits and stamp duties can, at best, be just a short -term Band-Aid. They have the advantage of course of being easy to remove when the m arket does cool. But they do not fundamentally shift the underlying demand for property. A buoyant property market is a sign of confidence in the economy and the future. But the line between confidence and over -exuberance is a thin one. When demand and pr ices streak ahead of growth fundamentals and defy repeated cooling measures, it may be time for more fundamental action. Source: Adapted from The Straits Times, 9 April, 2013 Extract 4: Beyond Building & Renewing Homes: HDB Brings Greener Homes to More Residents HDB plans and develops public housing towns that provide Singaporeans with quality homes and living environments. One key priority of HDB is the building of cohesive communities within its towns. Living environments are provided with community spaces for residents to mingle and interact. Public housing policies and schemes are formulated not only to meet changing needs and aspirations, but they also support national objectives such as maintaining racial harmony and stronger family ties, and focus on the needs of elderly and those who may be in financial difficulty. In November last year, HDB announced the Roadmap to Better Living in HDB Towns – to build well-designed, sustainable and community centric towns. The HDB Greenprint is an important initiative in this Roadmap - to build “Sustainable Towns”. HDB will therefore create sustainable homes in partnership with the community. The pilot “Green Neighbourhood” in Jurong East will test-bed a slew of sustainable initiatives within the estate. Some of the features include:

 Energy and water-saving solutions.  Pneumatic Refuse Collection System that allows refuse to be automatically sucked to a centralised collection area.  Integrated and Eco-Friendly Urban Transport Infrastructure.  Improved covered w alkways to provide shade, thus promoting walking as a commuting mode within the town and neighbourhoods. Source: Adapted from HDB Press Release, 21 April, 2012 Table 1: Property Price Indices By Type of Property 2006 2007 2008 2009 2010 2011 Residential HDB Resale 103.6 121.7 139.4 150.8 172.0 190.4 Private Residential 130.2 170.8 162.8 165.7 194.8 206.2 Commercial Office Space 89.3 118.4 110.1 92.0 109.4 124.5 Shop Space 101.3 114.7 112.5 105.6 114.7 120.8 Source: Urban Redevelopment Authority Questions (a) With reference to Table 1 and Extract 1: (i) Compare the change in prices of HDB Resale Residential property and Commercial Shop Space from 2006 to 2011. [2] (ii) Explain how the supply of new flats might help to 'keep a lid on prices' of resale flats. [2] (b) (i) Describe the trend in Private Residential propert