Housing market needs more certainty

National Development Minister Khaw Boon Wan’s comments in Parliament on the state of the property market illustrate the conundrum of viewing a glass of water as being half full or half empty.

Noting that residential property prices have moderated in recent months, he said the various measures to cool the market “have helped buyers, including those at the middle and low end of the market”.

Growth in mass market private housing prices outside of the central region slowed to 0.4 per cent in the second quarter of the year, compared with 1.1 per cent in the previous quarter, while overall private home prices moved up just 0.3 per cent in the first six months of the year, compared with 6 per cent a year ago.

And there is a warning more measures might be introduced if the situation requires.

“These are positive signs that the market is moving towards a stable and more sustainable path. We continue to monitor the market closely, and remain ready to revise and enhance the policy, if and when the situation demands it,” Mr Khaw said.

What exactly is the ministry monitoring, and what are its targets or goals?

It is also good to see that short-term property speculation has fallen sharply, as indicated by the relatively low volume of sub-sales. But the fact remains that home prices have not come down – they are still at historical highs.

Perhaps the ministry should be clearer about its goals and targets. What exactly is “a stable and more sustainable path”, in its view?

Foreign Buyers

Yes, the proportion of foreign purchases of residential property has come down – from 20 per cent last year to 7 per cent for the first six months of the year.

This is perhaps because of the introduction in December last year of the Additional Buyer’s Stamp Duty (ABSD).

Foreigners (albeit those from America, Switzerland, Liechtenstein, Norway and Iceland are exempt because of certain trade agreements) here have to pay an ABSD of 10 per cent when they buy a home here.

But what is the proportion of purchases by foreigners that Singapore would be comfortable with? I am sure we do not want to eliminate foreign sales altogether.

Also, what about the proportion of sales to permanent residents, who have been said to be one of the main causes of the steep jump in prices in sub-sales of housing board flats?

Spell Out Thresholds

As I have argued before in a previous column, there must be a fairer and more transparent way of introducing measures to cool the property market.

It is not fair for the Government to sell land one day and introduce cooling measures the next, as it has done previously. Buyers and sellers should not have to suffer huge losses by being caught unaware.

Property development takes time. It is often a five- to six-year proposition between buying the land, developing it and finally selling it. In the meantime, loans and other finances have to be managed.

Forecasts are made under prevailing conditions and with current factors in mind. Developers may feel shortchanged if the Government one day puts up a piece of land for sale and soon after introduces measures that are negative to developers.

Residential property buyers and investors would feel likewise, if they purchased a property on current assumptions and conditions, and find the Government introducing measures to dampen the market the next day.

Buying a property is a considerable investment; for most people it makes up a big chunk of their assets and life savings.

Property, in a society where a very large proportion own their own homes, impacts almost everybody. There is therefore a need for greater clarity in our housing policies. The Government should spell out the benchmarks or price thresholds that would entail a response in action from the ministry.

Also, if the Government believes in market forces, the “reserve price” in Government Land Sales should be abolished. You cannot say that market forces should prevail and at the same time artificially prop up land prices with the reserve price. The national coffers might suffer a bit, but it might perhaps help make housing more affordable.

There must be more certainty in the property market. There should be less – or no – speculation on when and what measures the Government would introduce to curb or cool the market.

By Conrad Raj – Today‘s editor-at-large.

Source : Today – 19 Jul 2012

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