Foreign ownership rules: When the Government intervenes …

The issue of foreign ownership of private residential properties has been a fairly hot topic of debate for newspaper readers recently.

Sensational news reports on foreigners buying private housing properties in Singapore never fail to draw many online comments, and some of the more unbiased and thoughtful comments have made it into print in the letters-to-the-editors section.

While some have called for some kind of ban, others asked that foreign buying be restricted to certain areas or types of properties or for us to adopt rules similar to those found in other countries such as Australia.

At the same time, there was also some robust defending of the status quo. It is not the duty of the Government to provide every local household with a private property as these are not basic but luxury goods. It is simply not possible with our scarce resources.

Foreign ownership of residential properties, particularly land, is an acutely sensitive topic in many countries, particularly in less developed ones. We do not have to look further than our neighbours, Malaysia, Indonesia and Thailand.

It has to do with the general income levels and with the economic progress achieved by the local population. Natives want a level-playing field and not have all the prime or quality properties taken away by rich foreigners, perceived to have an unfair advantage with their ample wealth.

Sometimes, it is psychological as land is considered sacred. In some of the oil-rich Middle-Eastern countries, the only way foreigners could own property in their own name was on man-made islands such as The Palm Islands – Palm Jumeirah, Palm Jebel Ali and Palm Deira in Dubai and The Pearl-Qatar in Qatar.

The Palm Islands are artificial peninsulas constructed of sand dredged from the bottom of the Persian Gulf on which major commercial and residential projects are built.

The Pearl-Qatar is a man-made island covering 400ha and consists of luxury apartments and town homes, penthouse and villas besides various other commercial developments.

Until recently, foreign ownership of private residential property was also a non-issue in Singapore and in Hong Kong, but talk to some Hong Kongers these days, even among the wealthier ones, and you sense a deep resentment against Chinese nationals who have been buying up residential properties in the former British colony in droves.

What capped the debate for me was a letter to the press published on Wednesday by Associate Professor Kelvin F K Low, the associate dean (external relations) of the Singapore Management University’s School of Law.

He was responding to an earlier letter which argued for no government intervention in the private property market. Besides the strict rules on foreign buying of public housing flats, he reminded readers that there are already existing restrictions in the private housing market.

Non-Singaporeans cannot buy landed property without consent. Two days ago, Law Minister K Shanmugam said he expected the number of approvals given to permanent residents who want to buy landed homes in Singapore to fall by more than half after the criteria was tightened further recently.

In his letter, Assoc Prof Low said that with the property market regulated at the bottom and at the top, it is those in the middle income bracket who are left feeling the squeeze.

In 1973, the Government introduced measures to prohibit the sale of residential property to foreigners without its consent.

These measures were relaxed in 1975 to allow foreigners to purchase residential property in buildings of six or more storeys.

The measures took form as the Residential Property Act in 1976 but the Act has lost its bite over time. Exemptions were introduced for developments designated “condominiums”, which today is almost every new development. In 2006, the need for “condominium” status was itself removed.

However, Assoc Prof Low warned that the decision to change the status quo should not be taken lightly. The Government derives substantial revenues from land sales and any restrictions may affect this revenue.

In his opinion, it may be unthinkable for measures as draconian as in 1973 but the idea of government intervention is “hardly ludicrous”. He ended by saying the “precise extent of intervention is a matter of government policy which, in a democracy, must in turn be accounted for come the next General Election”.

He took the words out of my mouth.

By Colin Tan – of research and consultancy atChesterton Suntec International.

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