Will there be a housing market overhaul?

The biggest news for the real estate industry after the General Election has to be the appointment of Mr Khaw Boon Wan as the new Minister for National Development.

Together with other new ministers, he will “have a free hand to rethink and reshape policies”, Prime Minister Lee Hsien Loong has said.

Mr Khaw has acknowledged that the issue of housing is red-hot with widespread unhappiness and he has pledged to make “housing and HDB Singaporeans’ popular icon again”.

He will have his work cut out for him. We are already into our fourth set of cooling measures and have progressively and significantly ramped up housing supply – both for the private and public housing sectors.

In the space of four years, we have had three very good years of new private housing sales. And judging from the sales figures for the first four months of this year, we are right on track to achieve yet another good year. For a good number of market players – home buyers, investors, bankers and developers, the roots have sunk in deep and, in my opinion, we are almost at the point of no return.

Over the past four years, our housing policies have elevated Singapore very rapidly to be among the most attractive property investment destinations in Asia, if not the world. It is no wonder that investors are flocking to buy properties here. I am told that some overseas buyers do not even come here to visit. Such is the reputation that we have cultivated for ourselves that these investors simply instruct their lawyers to arrange for some monies to be invested in properties here. It has been that simple.

In hindsight, it was too much, too quickly. It was never going to work because given the current income levels of the general population, it was always going to be at odds with providing affordable housing and satisfying the upgrading dreams of citizens.

In my opinion, Singapore is too small geographically. Our public and private markets cannot be strictly segregated as they are more intertwined than we think. The more policies we have to promote one set of objectives, the more the other has to give.

I have seen this in other countries. It came to a point where developers needed to guarantee a certain number to be built for locals before they can even gain approval for their projects that were mainly targeted at foreign investors.

In the eyes of foreign buyers, Singapore is one of the most investor-friendly environments in the world, if not the most attractive. Even in some major economies, where land is aplenty, they have more foreign ownership rules and restrictions than Singapore.

I have been asked what I hoped for in new policies under Mr Khaw. I say, put aside for the time being, our goals of elevating Singapore to hubs of excellence in the various fields. Let us get our priorities right first. The rest will follow naturally.

As I see it, our new minister has two major problems that he has to deal with urgently – the seemingly unabated robust demand for new public housing flats despite the significant rise in supply. He has to isolate those buying in advance or panic buys from those needing their flats urgently and to help this latter group first.

The second is how to deal with the excessive liquidity that is flowing into property – primarily into housing.

We have thrown a lot of supply at the problem but it does not seem to have worked – at least not without other accompanying measures. Some of us in the real estate industry already think we have set off a ticking time bomb with the amount of supply we are pushing out and – if nothing changes – even more supply right up to the end of this year.

If you believe that our objectives have been radically re-prioritised under our new minister, then do expect possibly wholesale changes, including the rolling back of some of policies which are at odds with the new priorities. Do not expect more of the same type of cooling measures that I suspect some analysts are anticipating. In fact, the rules of the game may be changed.

Inconceivable? Well, many would not have thought that our two former Prime Ministers leaving the Cabinet so soon after the General Election was conceivable.

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

COMMENTS