Cooling measures not meant to punish but to protect

There have been numerous analyses recently on how the housing market is reacting to the Government’s property cooling measures.

But to date, the only impact we can be truly certain of is the huge toll they have taken on the health of overworked reporters. Many have taken ill after rushing out market updates and analyses.

Beyond that, it is too early to assess how much the market has changed. The strongest buying interest has always been for new launches. The correlation between launches and sales is high.

Understandably, developers have held back their projects, taking time to re-assess the market and come up with new pricing strategies. Without new launches, we are never going to be sure of the effectiveness of the measures.

It is two weeks now since the big announcement but many are still not getting it. There have been an unusually high number of complaints about the unfairness of the measures.

Contrary to what some may think, the measures are not meant to penalise any group of buyers but to protect the financial system. It is to weed out risky buying – be it from speculators, investors or even genuine upgraders. What has fairness got to do with it?

If risky buying is allowed to continue, the bubble will become bigger as prices and fundamentals grow further apart. If it bursts, the system may collapse. Nobody benefits – everyone is a loser.

For speculators and investors, the message is clear: Manage your risks to make your money but do not be so greedy as to put the entire system at risk.

To genuine upgraders: If the timing of your sale and purchase under the new rules is so precarious financing-wise, you should seriously reconsider whether you should be upgrading at all in the current overly bullish market.

Do remember that the authorities see an overall heightened market risk, hence they have put in place the measures.

For most of us, property buying is almost always an emotional decision. Often, a great deal of objectivity is lost during the buying stage. A year or two later, these same measures may be looked upon as a blessing in disguise.

Some recent analyses also appear to assume that prices will always be rising. Prices do and will come down eventually. It should not be a case of upgrade now or never. It is much safer to upgrade during a stable or market correction phase.

Similarly, new ownership rules for HDB resale flats that exclude private property owners unless they sell their private homes first are meant to solve the shortage of resale flats for genuine occupiers, not to penalise investors. Surely even they cannot begrudge the advantage given to those who have yet to own their first property.

But what got me really baffled was the advice to people not to give up owning an HDB flat as it keeps its value better than a leasehold private apartment. Surely, a golden rule of investing is to buy low and sell high.

If prices of HDB resale flats have reached record highs with little further upside expected, is it not better to sell? One should not be unduly fixated on whether it has turned into something that sometimes money cannot buy.

The measures are meant to stabilise the resale market, which means less volatility going forward. Less volatility means less opportunity for profit making. Such advice does not make sense for investors.

For the average Singaporean, it would not matter much anyway. The majority of Singaporeans have enough financial resources to own only one property. And if they upgrade, most cannot afford to keep their previous property.

That is the reality. It is the reason why most are unhappy about runaway property prices. They see their upgrading dreams dashed, not because they lost out on making money.

By Colin Tan, head of research and consultancy at Chesterton Suntec International.

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