Pay more attention to raising supply

While the Government has to act to prevent the property market from getting beyond the reach of most Singaporeans, I am however not very comfortable that the latest steps – announced last week – are the best means of dealing with the issue.

Not only are the measures fairly drastic, they appear to be dealing more with curbing demand than raising supply.

The Government has claimed that there is no shortage of supply. It points out that the sites awarded last year under the Government Land Sales Programme (GLS) will yield about 13,300 units. For the first half of this year, it says it will make available sites that would be able to yield about 14,300 units.

Further, as at the end of the third quarter of last year, there were about 64,400 uncompleted units in the pipeline, of which roughly half were still unsold. These compare with the annual take-up rate of about 12,700 units between 2007 and last year. Unfortunately, there is a lag period between the site award and the sale of the property.

The latest attempt to cool the property market may have the unintended effect of reducing supply as developers decide to take a wait-and-see approach. They might be even willing to pay the penalties for missing completion deadlines rather than sell at a loss. It could also see the bigger developers with the financial muscle to hold being able to take advantage of those who can’t hang on to their sites.

And will the new rules which took effect the day after they were announced – Jan 13 – force buyers to give up options, now that financing will be more difficult to obtain?

Under the new rules, financial institutions can only grant loans amounting to half the value of the properties purchased by non-individuals, such as companies, trusts and collective investment schemes. Individuals with existing outstanding mortgages can now borrow only up to 60 per cent of the value of their next property purchase.

Another unintended effect could be that those who have the financial resources will be able to get more properties on the cheap – to sell when prices recover later.

But should the Government be overly concerned with private-sector housing? Should it be going all out to prevent a fool from parting with his money?

Despite numerous warnings about the dangers of a property bubble bursting and that the current low interest rate regime might not last for too long, property prices, prior to the latest measures, continued to climb.

I believe the Government should be more concerned about housing the masses. It has done a marvellous job, having built more than one million units since the Housing and Development Board (HDB) was established. At present, some 900,000 units house more than four-fifths of the population. For the vast majority of newly-weds, their first home is likely to be an HDB flat. These are the people whom the Government has to be concerned with.

The Government has said it will be building more HDB flats – up to 22,000 Build-To-Order flats this year – to accommodate the masses. Will these be enough?

It should perhaps also get out of building executive condominiums (EC) units which provide condo-like facilities and the Design, Build and Sell Scheme (DBSS) units. The HDB says land for some 8,000 of these could be launched this year. Why should the HDB be catering to the needs of this select group?

Look at what is happening to the estates that were built by the HUDC for an earlier group of the so-called sandwiched class. Some like Farrer Court, Amberville and Bedok Reservoir, have been sold en bloc to private developers. The remaining ones – Shunfu, Braddell Heights, Pine Grove, Laguna Park, Neptune Court, Chancery Court and Eunosville – have been privatised or are in the process of being privatised in anticipation of en bloc sales. Why must public funds be used to cater to such profiteering?

Rather than be all things to all people, the Government should concentrate on housing the masses.

Source : Today – 21 Jan 2011

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