Unwinding property cooling measures now ‘could do more harm than good’

Any move made by the Government to tamper with the property cooling measures now could fuel speculation that further easing is on the way, and threatens to undo any price moderation the market has achieved so far by bringing back ­potential buyers who have been fishing for the bottom.

In addition, increasing debt levels during today’s slower growth environment may have harmful consequences on the economy when fundamentals weaken, with households facing greater difficulties in servicing debt, especially when interest rates rise.

This is the scenario painted by ­experts TODAY spoke to about the risks of tinkering with the cooling measures now amid louder calls by the industry to do so.

They agreed that it is too soon to make such a move given that the property market has not taken a ­“decisive turn” for the worse, even though ­underlying economic growth has slowed.

A report by DTZ found that 87 properties were put up for mortgagee sales last year, or an 85 per cent increase from 47 units in 2014. It added that when the property market was on an uptrend in 2012, only nine units were listed for mortgagee sales as a result of owners’ inability to finance their loans.

However, experts said such listings, though increasing, are not yet widespread enough to signal a downward spiral of the property market.

“The market has softened, but we haven’t seen conditions taking a ­decisive turn for the worse. We haven’t seen people throwing in the towel, we haven’t seen distressed sales, I think it’s also because the underlying labour market condition is still supportive of people being able to service their loans,” said Mr Song Seng Wun, economist at CIMB Private Banking. “If the Government were to ease (curbs), that would be seen as the first step to further easing. This could induce a return of speculative activities … There could be risks to underlying growth in terms of people more willing to take on debt when there could be a turn in the economic fundamentals.”

UOB economist Francis Tan said more investments poured into real estate assets could limit consumer spending on other areas of the economy, especially when interest rates are rising. This can hurt growth potential.


Renewing its calls for the Government to roll back the measures, the Real ­Estate Developers’ Association of Singapore said last month that ­developers face pressure from measures such as the Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate, which impose hefty charges on developers with unsold units.

Just last week, PropNex proposed reducing ABSD for all groups of buyers, loosening the loan-to-value ratio, and increasing the mortgage servicing ratio for executive condominium buyers. The agency argued that a pre-emptive calibration was better than post-corrective actions.

The concerns of an over-correction are valid, said analysts, as getting the property market right is especially important now so as to not add stress to an already slow economy. However, more signs are pointing to the need to retain these measures.

For one, private residential prices have corrected a total 8.4 per cent by the last quarter of 2015 since the peak in the third quarter of 2013, ­official ­data showed. However, the nine consecutive quarters of decline pale in comparison to the more than 60 per cent increase in prices from 2009 ­after the global financial crisis.

“Has the market reached the stage of stability? I believe there is still some way to go before the trigger level could be hit. The stock level and ­vacancy rate, though, have risen recently; the price adjustment has not fully ­reflected the oversupply situation,” said ­Associate Professor Sing Tien Foo from the National University of Singa­pore’s Department of Real Estate.

Other analysts noted that despite the muted market, developers have not faced financial distress due to market conditions, and while more real ­estate agents are leaving the ­industry for other professions, many have found opportunities to do well in the current climate. PropNex said it closed more than 40,000 transactions for the first time last year and collected ­record gross commissions of more than S$200 million.


Besides stabilising the property market for economic purposes, UOB’s Mr Tan said “a large part” of the Government’s intention is socially driven, such as ensuring affordability of homes, especially in Singapore where home buying is often the first step to settling down and building a family.

While maintaining affordability for those who have not bought a home, the Government also faces a tricky task of preserving the wealth of those who own a house, said ­Assoc Prof Sing. “It is challenging to draw a fine line in the policy decision … it is not easy to determine what is the optimal time to remove the measures because policymakers need to gauge with confidence what is the reasonable price level given the dynamic

nature of the market,” he said.

Last month, Minister for National Development Lawrence Wong reiterated the Government’s stance that it is “too early” to relax the measures, as ­doing so could result in a market ­rebound.

Responding to increasing calls for the cooling measures to be tweaked, the Government has maintained that it is not time yet to roll back the measures, while hinting that it has a “rough idea” of when to do so.

Several real estate industry players said that while easing of the measures served their interests in propping up the market in the short term, they ­relented that the Government has more aspects to consider in its decision.

Mr Kwek Leng Beng, a prominent industry veteran and executive chairman of City Developments, said ­recently that people in the industry “are looking at it through a very small lens. The Government is looking at it in a bigger picture”.

To that, Mr Chris Koh, director of property firm Chris International, said: “The best is to accept that the measures are here to stay for the time being.”

Source : Today – 13 Mar 2016

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