Dunman High School 

Year 6 Preliminary Examinations 2009 

ECONOMICS                               8819 
Higher 1 
                                                 3 hours 
Monday 28 September 2009                          8:30 – 11:00 a.m. 
 
Additional Materials:  Writing Paper 
 
 

READ THESE INSTRUCTIONS FIRST 

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 staples, paper clips, highlighters, glue or correction fluid. 
 
Answer both questions in Section A. Start each question on a fresh sheet of paper. 
Answer either one question in Section B. 
At the end of the examination, securely fasten your work to each question separately. 
The number of marks is given in brackets [  ] at the end of each question or part question. 
You are advised to spend several minutes per question reading through the data before you begin 
writing your answers. 
 
 
 
 
 
 
 
 
 
 
This document consists of 11 printed pages, including this cover. 
 Section A: Case Study

Answer both questions

Question 1 - En Bloc Fever in Singapore

Extract 1: En-bloc, a Uniquely Singapore Experience

Collective sale or more commonly known as en-bloc is a combined sale by owners of 2

or more property units to a common purchaser. The most common en-bloc sale is the
sale of all the units in a development to a purchaser after which the sale proceeds are
divided amongst all the unit owners. The year 2007 was indeed a roller-coaster year for
Singapore’s property market. It will go down as the most spectacular in the 13-year
history of Singapore's en bloc market. It was a story of massive fortunes made and lost.
A record number of deals changed hands at a frenetic pace. Prices shot through the
roof as it was a period when the perception of Singapore's prospects had changed
dramatically and local property prices appeared cheap relative to the major global cities
that Singapore started being associated with. Funds and investors from overseas
poured in, and developers and local speculators bought feverishly. To be precise, it was
the first half of 2007 that was truly phenomenal for the en bloc market. In just those six
months, 58 en bloc deals involving 5,500 owners took place at a staggering value of
$10.8 billion. That amount was close to the value of deals in the previous four years put
together! The dissenting voices of the minorities in many en bloc projects - sold or not,
irrespective of their motives - created the impression that the en bloc laws that had
worked well for eight years needed an overhaul.

Source: Adapted from The Business Times, 27 March 2008

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Extract 2: En bloc effect pulls up HDB Resale Prices

The property boom seen in the past two years has filtered down to the heartlands. The
Housing and Development Board (HDB) resale price index for 2007 was 9.8% higher
than 2006. HDB resale market consists of HDB flats that are sold in the open market
and not flats sold directly by HDB. Market watchers say the key factor driving the
increase this time around is the army of en bloc sellers downgrading for their
replacement property. Mr. Mohamed Ismail, the CEO of PropNex has predicted this
increase in HDB resale prices to continue but he does not expect prices to run away as
they did in 1996 when the price index rose 34.4% as the authorities will step in quickly
to prevent public housing prices from becoming unaffordable.

Source: Adapted from The Business Times, 02 October 2007

Figure 1: HDB resale price index (2005 – 2007)

HDB Resale Price Index 
(4th Quarter 1998 = 100)
130
120
110
100
90
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07

Source: HDB Website

Figure 2: Number of collective sales (1996 – 2007)

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Extract 3: En bloc sales boosting housing rentals in Singapore: analysts

Housing rentals in Singapore have risen faster than property prices, a phenomenon that
is unique in this region. Property analysts have pointed the finger at collective, or en
bloc, sales, but they say they are not expecting rents to drop sharply even when the
redevelopment projects are complete. Rentals for private residences in the Republic
jumped 10.4 percent in the second quarter, while property prices rose by a more
modest 8.3 percent. Analysts have pointed the finger at collective sales, which
quickened in pace in the last 18 months.

Looking ahead, analysts say that investors should expect rents to stabilise or correct
downwards once supply comes back. Colin Tan, Head of Research and Consultancy,
Chesterton, said: "I suppose the properties that are being redeveloped when they're
completed... prices or rentals will stabilise. Whether they will come down or not will
depend on, I suppose, the prospects for the Singapore economy.

Source: Adapted from ChannelNewsAsia, 21 September 2007

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 Figure 3: Rental index for private properties (2005 – 2007)

Rental Index for Private 
Properties (4Q98 = 100)
160
140
120
100
80

Source: URA Website

Extract 4: Regulations to cool the en-bloc fever

A slew of measures aimed at making the red-hot collective market fairer were passed in
parliament. These measures strive to protect the interests of minority owners as well as
to ensure that the property prices in Singapore do not continue to spiral upwards
uncontrollably. Property players say they have spurred a rush among homeowners to
go en bloc before the new rules make it harder. But some consultants, like Knight Frank
director of research and consultancy Nicholas Mak, say the changes may not have a
large impact on the market. 'They will add more procedural hurdles, but on the whole,
they were not designed to slow down en bloc sales and they are unlikely to do so,' he
said.

Key revisions include a five-day period for owners to change their minds after signing
the collective sale agreement. Also to come are new rules on setting up a sale
committee and new powers for the Strata Titles Board, which governs collective sales.
Another major change addresses an imbalance in voting rights in a mixed development.
It adds an extra level of owner consent, by floor area, before a sale can proceed.

Source: The Straits Times, 21 September 2007.

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Questions

a) In the light of extract 1, explain one reason for the increase in the number
of collective sales seen in 2007. [2]

b) i) Summarise the trend in HDB resale prices from the period 2005 to 2007. [2]

ii) Using economic analysis, account for the trend observed in b)i). [4]

iii) With the aid of a diagram, explain how the authorities can step in to
“prevent public housing prices from becoming unaffordable” (Extract 2). [4]

c) Using the data provided, discuss whether there is a link between the
number of collective sales and the rental for private properties. [8]

d) Comment on the impact of en-bloc fever on the Singapore economy. [10]

Total [30]

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Question 2 New Rules of the Game

Extract 1: Performance of the Chinese Economy

No country has ever sustained such a blistering rate of growth over three decades.
Since 1978, China has grown by an average of almost 10% a year— more than Japan
or the Asian tigers achieved when their economies took off. China's economic success
has been based on high savings, openness to trade, good education and strong
productivity growth. The biggest worry China is facing now is that inflation surging out of
control and overheating of the economy. In August 2007, inflation jumped to 6.5%
despite Central Bank raising interest rates five times this year.

This is why an American recession might be a blessing in disguise to China as weaker

exports might force the government to do more to boost domestic demand which will
help make growth more sustainable. Even if the fall in exports threatens to slow growth
by more than desired, the government's strong fiscal position and low public-sector debt
(at 18% of her GDP) would give the government ample room for a fiscal stimulus.

Economist 2006 and 2007

Extract 2: Performance of the India economy

India's growth spurt appeared to be less sustainable than China's. Statistics have
signalled that the economy is at risk of overheating more than China. An astonishing
96% of firms have reported that they were operating close to or above their optimal
levels of capacity utilisation. India cannot grow as fast as China without igniting inflation
but Indian policymakers seem reluctant to admit that economic growth has exceeded its
speed limit over the past three years, let alone slow it. They prefer to bask in the belief
that India has become another China, able to keep growing ever faster without inflation
rising.

Economist, 2007

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 Figure 1 : Inflation in India and China

Extract 3: Asia as the alternative engine

In the past, American recessions meant global recessions. But there seems to be a
change in the driving force of the world economy as emerging economies in Asia seems
to overtake America since the start of the 21st century. Ever since America’s recession
in 2001, China’s share of its exports to America has shrunk; the European Union and
other emerging economies are now more important markets to China. In addition, the
real domestic demand in emerging economies in Asia is expected to increase by 7% in
2006 as compared to 3% in America (Figure 2) and international retailers are battling to
get a stake in China as rising living standards and rapid urbanisation create masses of
new consumers.

Figure 2: Real consumer spending in China

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However economists pointed out that Asian consumption levels are still fairly low. In
Asia, household consumption accounts for only around 55% of GDP on average,
compared with 71% in America. In addition, America is still the biggest importer in the
world. In sum, if America suffers a slump, the economies of China and the rest of Asia
would slow, but they are unlikely to be derailed. However, a slowdown in America could
affect Asia indirectly through other channels.
Economist, 2007

Table 1: GDP (PPP) share of world total (%)

2000 2001 2002 2003 2004 2005 2006 2007
America 21.41 21.06 20.77 20.5 20.25 19.96 19..66 19.31
China 11.02 11.65 12.34 13.06 13.67 14.4 15.08 15.83
India 5.39 5.48 5.55 5.72 5.88 6.09 6.28 6.43
Singapore 0.215 0.205 0.207 0.205 0.212 0.215 0.219 0.219

Table 2: GDP constant prices (annual percentage change)

2000 2001 2002 2003 2004 2005 2006 2007
America 3.7 0.8 1.6 2.5 3.6 3.1 2.9 1.9
China 8.4 8.3 9.1 10 10.1 10.4 11.1 11.5
India 5.4 3.9 4.5 6.9 7.9 9 9.7 8.9
Singapore 10.1 -2.4 4.2 3.1 8.8 6.6 7.9 7.5

Table 3: Current Account Balance (percentage of GDP)

2000 2001 2002 2003 2004 2005 2006 2007
America -4.3 -3.8 -4.4 -4.8 -5.5 -6.1 -6.2 -5.7
China 1.7 1.3 2.4 2.8 3.6 7.2 9.4 11.7
India -1 0.3 1.4 1.5 0.1 -1 -1.1 -2.1
Singapore 11.6 14 13.7 24.2 20.1 24.5 27.5 27

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Questions
 
a) i) With reference to Figure 1, compare the changes in price level of China
with India from 2004 to 2006. [2]

ii) Account for your observations above. [4]

b) Describe the trend in China’s current account balance from 2001 to 2007. [2]

c) In view of the data provided, explain the view that ‘an American recession
might be a blessing in disguise to China’ (Extract 1). [4]

d) i) To what extent are Figure 2, Table 1 and Table 2 sufficient in assessing

the view that China is indeed taking over America as the engine of growth
of the world economy. [6]

ii) With reference to data and your own knowledge, discuss the impact on
Singapore economy if emerging economies were to overtake America as
the engine of growth in the future. [12]

Total [30]

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 Section B Essay
Answer either one question

3 (a) Explain how public goods and demerit goods cause market
failures. [10]

(b) Comment on the policies adopted by the Singapore government in

dealing with these forms of market failure. [15]

4 How far do you agree with the view that monetary policy is the most appropriate
policy to counter inflation in Singapore?
[25]

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