TJC H1 ECONS QP

TEMASEK JUNIOR COLLEGE Preliminary Examinations 2017 General Certificate of Education Advanced Level Higher 1 ECONOMICS Paper 1 8819/01 Tuesday 29 August 2017 3 hours Additional Materials: Answer Paper, Cover Page READ THESE INSTRUCTIONS FIRST Do not turn this page over until you are told to do so. Write your name and CG number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a HB pencil for any diagrams or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Section A Answer all questions. Section B Answer one question. Begin each question on a separate sheet of answer paper. Fasten your work for Section B and the cover page together. Write the question that you attempted for Section B on the cover page. Hand in your answer to each question separately . The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages. Temasek Junior College Economics © TJC 2017 [Turn over

2 Section A Answer all questions in this section. Question 1 Real Estate Bubbles and Cooling Measures Figure 1: Singapore Residential Property Price Index Source: Urban Redevelopment Authority, Singapore Extract 1: Public housing: A pillar of nation-building A hallmark of the public housing programme has been Singapore’s policy of home ownership. Started in 1964, the Home Ownership for the People Scheme gives home-owning citizens a tangible asset and stake in the country, and promot es rootedness and a sense of belonging among Singaporeans, thus contributing to the overal l economic, social and political stability of Singapore. Today, 82% of the population is housed in Housing a nd Development Board (HDB) estates, and the estates (comprising flats and a comprehensi ve range of facilities) have become a common point of emotional reference for the vast ma jority of Singaporeans. This "HDB Experience" has played an important role in bonding Singaporeans, in the same way that National Service and the education system have crea ted common experiences among Singaporeans of all races and from all walks of life. Source: Civil Service College, retrieved Aug 2017 Extract 2: New HDB flats have remained affordable: HDB To keep flats affordable for Singaporeans, the HDB has disbursed S$1.6 billion in Additional CPF Housing Grants (AHG) to close to 83,000 househo lds since 2006. It has also given out S$297.61 million in Special CPF Housing Grants (SHG ) since 2011 to almost 20,000 households, as of November 2015.

3 ©TJC 2017 [Turn over HDB gave this update in a media statement on Sunday (Jan 3). Eligible first-time buyers currently enjoy up to S$80,000 in housing grants, c omprising the AHG of up to S$40,000 and the SHG, also up to S$40,000. More than 80 per cent of Singapore’s resident popul ation are housed in more than 900,000 public flats across the island and 95 per cent of them own the flats they live in. Source: Channelnewsasia.com , 2016 Extract 3: Why a Chinese Real Estate Bubble Could Bring Down the Global Economy Analysts are sounding the alarm about growing Chine se debt loads and a potential real estate bubble that threatens to dramatically slow growth i n Asia, and which could be a drag on the entire global economy if it bursts. In September, Ma Jun, the chief economist of the Pe ople’s Bank of China’s research bureau, argued that the Chinese government must take action to stamp out real estate speculation. "Measures should be taken to put a brake on the exc essive bubble expansion in the property sector, and we should curb excessive financing into the real estate sector," Ma said, according to a translation of a Chinese news report by Bloomberg News. Other Chinese analysts have been even more vehement . "The dangers of overly inflated housing prices are huge," writes Hu Shuli, chief ed itor of Caixin Media in Beijing. "Indicators such as the ratio of mortgage payments to a buyer’s income indicate that on a relative basis, China’s current housing prices are now more expensi ve than those during Japan’s property bubble, and are close to US prices just before the global financial crisis exploded." Chinese policymakers have instituted measures aimed at cooling the overheating housing market, with some cities imposing "local purchase r estrictions, raising mortgage down payment ratios, and tightening developers’ financing," acco rding to Zhiwei Zhang, chief economist with Deutsche Bank Research. He also points out, however , that these measures may have simply led investors to funnel money into property into ci ties where real estate has been appreciating less quickly. Source: Fortune , 2016 Extract 4: Cooling Measures for the Residential Property Market The Government has implemented several rounds of me asures to cool demand and expand supply, so as to moderate the increase in housing p rices. While these measures have dampened speculative buying, the demand for residen tial property remains firm and prices have continued to rise. The continued buoyancy of the property market refle cts the very low interest rate environment and continued income growth in Singapore. These fac tors supported a record level of housing transactions last year, particularly from investmen t demand. Housing prices have also shown signs of reaccelerating in recent months, in both t he private residential and HDB resale flat markets. Price increases, if not checked, will run further ahead of economic fundamentals and raise the risk of a major, destabilising correction later on. The Government has therefore decided to implement a further set of measures to cool the private and public housing markets. These measures are calibrated to be tighter on property ownership for investment, as well as on foreign buy ers. To discourage over-borrowing, financing conditions for housing have also been tig htened. In addition, structural measures have been implemented to strengthen the policy inte nt of public housing and executive condominiums. Deputy Prime Minister and Minister for Finance Mr T harman Shanmugaratnam said: “The reality we face is that interest rates are extraord inarily low, globally and in Singapore, and

4 continue to add fuel to our property market. We hav e to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices further down the road.” Minister for National Development Mr Khaw Boon Wan said: “A large supply of public and private housing – up to 200,000 units in total – wi ll be completed in the coming years. Coupled with the new measures, we will be better placed to ensure that housing remains affordable to Singaporeans.” Source: Monetary Authority of Singapore , 2013 Extract 5: Here's why it is time to thaw property cooling measures Property prices are now at one of the most affordab le levels on record. Singapore has averted a technical recession, posting 1.8 per cent growth in gross domestic product (GDP) for the 4Q16, and an overall growth of 1.8 per cent for the year, according to recent estimates from the Ministry of Trade and Industry. But with a subdued economic outlook both globally and in Singapore, as well as expectations of rising interest rates, house prices are under consi derable pressure. Real estate consultant JLL said the residential property market is likely to r emain stagnant with cooling measures still in place alongside slow economic growth. Private home prices in Singapore softened further i n the last quarter of 2016, for 13 consecutive quarters and reaching their lowest leve l in six years, as flash estimates from the Urban Redevelopment Authority (URA) showed at the beginning of January. Source: Singapore Business Review ,