Revisiting the property market

(2011-09-30 11:38:40) 下一個

Are property players in Singapore being adequately served by the current government measures? What needs to be changed, if anything? -BT

Sat, Oct 01, 2011
The Business Times

Are property players in Singapore being adequately served by the current government measures? What needs to be changed, if anything?

Tan Tiong Cheng
Knight Frank

Singapore has introduced four rounds of cooling measures, with the latest coming in on Jan 13, 2011. Eight months down the road, the economic outlook has changed drastically. Singapore is facing a looming technical recession amidst an increasingly uncertain and negative economic outlook for US and EU.

In addition, many public housing policies have been reviewed to address the high HDB resale prices. These include ramping up the HDB supply for 2011 and 2012 to 50,000 units, revising the income ceiling for HDB flats from $8,000 to $10,000 and for Executive Condominiums from $10,000 to $12,000. It will take time to see the impact of these policies, but public housing issues have largely been addressed.

However, the mass residential market's dynamics have changed, and market cycles are getting shorter and more volatile. Professor Nouriel Roubini, a professor at New York University's Stern School of Business, has predicted that the world economy will face a perfect storm in 2012 to 2013.

Housing is the perfect ingredient to magnify the potential damage. What the Singapore property market least needs is a self-inflicted injury arising from oversupply of residential units leading to a double whammy crisis from both the external and the internal fronts.

Public policies should be nimble and decisive. Perhaps the government could consider re-calibrating these cooling measures when the time comes to prevent Singapore from being drawn into this perfect storm.

Dan McConaghy
FICO Asia-Pacific

To maintain a sustainable housing market and economy, the onus isn't solely on the government or property players. For supply and genuine demand to optimally align, other parties also have a responsibility.

Mortgage health is a leading economic indicator, and mortgage lenders, for example, have a role to play to ensure that would-be home buyers have access to credit. Should the current situation thaw, we need to ensure that we have a sound lending environment in place to support genuine demand. Local lenders should be assessing whether their portfolios and credit risk management infrastructure can sufficiently sustain a hotter housing market.

At FICO, we've spent the past two years working with lenders - including two-thirds of the top global banks and 90 of the 100 largest US financial institutions - to recover from the mortgage crisis. We have seen that revisiting policies and risk management strategies before one expects the housing market to heat up will go a long way towards mitigating risk in the long term.

Annie Yap
Managing Director
AYP Associates Pte Ltd

The property market is not solely influenced by government initiatives, but by the economy and the global situation. With the turbulent state of the stock market these days, perhaps the government might need to take special care not to dampen the market demand for property and should consider reviewing the cooling measures.

This could help stimulate the market. If the cooling measures are removed, the government would have to remain prudent in conducting sales of land to ensure that the increased demand will not result in oversupply.

Redas' suggestions are meant to help the property market stay healthy and robust. I am sure the government is aware of this and will likely take Redas' requests into consideration as it continually reviews the property situation to ensure that a crash does not occur, an event that would adversely affect its citizens' livelihood.

Whatever conclusion is reached will be intended to sustain the market for the benefit of all sectors, citizens and developers alike.

Matt Beath
CEO, Asia

Typically, businesses operating in a free and open market are driven by the natural laws of supply and demand; the market finds a natural equilibrium and allows the entire supply chain to function cohesively in a value-driven manner that delivers profit or loss. The reserve list system certainly favours a more open market philosophy.

However, it is important to consider the broader multiplier effect of policy on the attractiveness of Singapore Inc for inward investors.

As such, government intervention, where land sales are concerned, should be viewed as positive and necessary even if it contradicts the instincts of the typical entrepreneur.

Paul Endacott
Managing Director, Singapore

The current measures have effectively curbed some speculative activity by Singaporeans and encouraged greater financial prudence, and have helped to maintain a sustainable property market which could have led to the formation of a property bubble.

Given the current climate and the uncertain economic times ahead, these measures should remain in place. Genuine cash-rich buyers will still buy private properties.

However, with the stringent/tighter controls on the issuance of employment passes to foreigners and PR cards to immigrants, the property players may see a drop in demand for private properties over the next two years.

Should this occur, then the government will need to review the measures and other regulatory issues on attracting potential foreign investors.

Florence Ng
Managing Director, Founder
Straits Talent Pte Ltd

In Singapore, where the supply of land is finite, real estate has been, and will remain, a good form of investment when held over the long term. All property players, be they developers, owner-buyers or speculators, either local or foreign, will do well to bear this in mind. Much has been debated about the extent of government intervention in a market that is respected as a First World city with high grade real estate investment potential.

All things considered, the Singapore government has done well to date in maintaining a delicate balance between long term real estate appreciation (which is wealth accumulation for the nation) and ensuring that the average man in the street is not priced out of the market.

Policies and changes made to the sale of public housing (HDB), the government land supply programme, financing guidelines and restrictions as well as taxation regime will invariably impact private property transactions.

No policy-maker has a crystal ball, and even with the best projections and forecasts, sometimes these measures introduced may inadvertently over-dampen the market.

Property developers have consistently made money, more in the good years, less in the bad years. Owner-buyers need not lose sleep as they are paying for a roof over their heads, and it's better to service a housing mortgage than pay rent. With the first option, they can hope for some capital appreciation along the way, thus beating inflation. As for the speculators - they speculate. They take a punt, and therefore, they should learn to be responsible for their risk taking. Sometimes they win, other times they lose. They need to have the appetite to stomach the losses.

Perhaps the biggest change that needs to take place for all property players is a mindset change. Accept the fact that as a property investor, you stand to make or lose money. Therefore, only invest what you can afford to lose. Appreciate that over the long haul, applying the basic law of economics - demand and supply - in land scarce Singapore, property investments will yield a positive return.

Dora Hoan 
Group CEO
Best World International Ltd

With a strong economy despite the global meltdown and a recognised high quality of living, Singapore properties command some of the highest prices in Asia.

As the property market is currently in a strong growth trend, care must be taken that tightening measures and regulations do not go to extremes so as to artificially suppress what many believe is a robust and real growth.

I believe though that cooling measures should be calibrated to target specific markets. This can be done by carefully looking into the factors that drive demand for various market segments.

In other areas, an uncertain global economic outlook makes it imperative to review land sale programmes so as to keep a rein on supply and ensure a more sustainable market.

Ronald Lee
Managing Director
PrimeStaff Pte Ltd

The property market in Singapore has always been a hot button issue. It is a tough balancing act for the government in terms of implementing the right measures to please all parties from buyers and sellers to property developers.

The current measures were put in place to moderate sky rocketing prices that were putting property out of reach of the average Singaporean. It appeared to be effective as it did serve to cool prices and demand slightly. While homebuyers welcome this, there are repercussions on developers.

On the one hand, the tightening measures are not to the advantage of property developers as they result in slower movement of units and lower launch prices.

On the other hand, if the government does not prevent prices from soaring further, the probability of a crash increases and that will not bode well for property players either.

The policies on land sales directly impact demand and supply and we certainly do not want a situation of oversupply as it will cool the market too much.

Thus, I believe Redas' suggestion to moderate future land supply by using the reserve list system instead of the confirmed list is a good approach as it would let the market drive demand.

Patrick Liew
HSR Property Group

Government measures to curb runaway prices may not work as long as consumers and industry players are ignorant, apathetic and irresponsible. To ensure stability and sustainability of the property market, we need a more accurate projection of supply and demand for housing. This requires better feedback from the ground and coordination between government agencies.

The authorities need to ensure that comprehensive information is available, accessible and affordable to the market and in particular, consumers. Only with greater transparency can the market become more prudent and efficient.

As the average consumers will probably make an average of three to five property transactions in their lifetime, they cannot be deemed to be experienced and mature. There is a need to conduct more educational programmes and provide other resources to help them make better-informed judgements.

In short, we need to adopt a more holistic perspective in resolving the challenges faced by the property market, including the players in it.

David Leong
Managing Director
People Worldwide Consulting Pte Ltd

The government's objective is to ensure a sustainable and stable property market, taking out the froth and volatility, and will adopt any measures to remove the tendency of wide gyrations and market aberrations.

The government prefers to err on the side of caution, and this explains the policies of increasing the holding period from three to four years for Seller's Stamp Duty (SSD), and raising the SSD rates.

The Loan-to-Value (LTV) limit has been lowered so as to discourage low-cost flipping of property with the continuing low interest rates and high liquidity. All these measures provide strong disincentives for investors who are eyeing short-term gain.

Such policy calibrations are not an exact science and the impact is not immediately quantifiable. Over-stretched and prolonged suppressive policies may affect property prices should the economy suddenly take an adverse turn due to pessimism in the world economy. The financial horizons over in the US and Europe are indeed bleak.

The government therefore needs to be attuned to current sentiments and to respond swiftly with policy adjustments to prevent a market meltdown of property prices. In Singapore with our finite land resources, prices are unlikely to undergo abrupt collapse since real demand can support a narrow price band.

Artificial suppressive measures used for cooling prices must be monitored closely to prevent the fleeing of capital and liquidity elsewhere with better returns.

Whatever, to err on the side of caution is always better than being bullish in uncertain times. Cooling off measures are not about making the music stop with the last person holding to an unsold and over-valued property but to ensure that the music plays on and everyone has a turn to hold the ball with a stable value.

Government needs to pull back and push forward policies with its invisible hands so as to maintain a steady balance in the marketplace.

Lim Soon Hock
Managing Director

The hot issue in the local property market is insufficient public housing at affordable prices. In this regard, the recent measures introduced by the government in raising income ceilings for public housing and accelerating the building programme would in all probability address the problem.

In any case, the demand for private properties would probably have taken into account the group of home buyers who do not qualify for public housing previously and who find private properties unaffordable. This sandwiched group would have no, or negligible, impact on demand for private properties.

The bigger issue concerning the property market is that prices have escalated significantly and contributed to inflation. We therefore can expect the government to take those measures for the larger good of Singapore. I think property players will have to live with this intervention by the government for some time, until inflation is brought under control.

However, should the global economy continue to slide, and this hits Singapore, we can expect the government to take corrective actions to moderate land supply, among other prudent measures. While the heat is currently on the property players, it is also fair to say that there is always hope for them in the future property market, given our scarcity of land.

Andrea Ross
Managing Director (Singapore & Malaysia)
Robert Walters Singapore

The government's implementation of new policies has been an attempt to stave off a potential property bubble. The measures have tried to manage rapidly rising property prices. The policies were no doubt a bitter pill to swallow for some property developers, while offering some needed relief for aspiring home owners. With challenges ahead for Singapore's economy, the government chose to approach with caution.

The current government property policies serve as a crucial form of checks and measures to protect the property market from unsustainable highs. Demand and supply were left to market forces previously. But the government saw a need to step in and therein lies an important need to perform its balancing role adequately. Ideally, the government will be able to meet the needs of both consumers and property developers somewhere in the middle.

As the Real Estate Developers' Association of Singapore (Redas) requests for a review of the cooling measures and to moderate its land supply programme, it is a call for assistance from property developers who saw an immediate drop in sales volumes following the new regulatory measures. It is a tough situation for the government to be in. The policies implemented in early 2010 were a response to the property situation back then. However, as the economy changes, the government needs to relook its policies to see if they still remain relevant to the current economic situation.

Viability and timeliness need to be considered in choosing whether to moderate the land supply programme, or whether to tweak current cooling measures.

Policy-planning is an intricate process, with each policy developed to ensure that the needs of the majority are met. The government should take the same careful approach as it did before, thinking twice before responding immediately to big players in the property market. It should bear in mind the needs of Singaporeans and other genuinely interested property buyers too.

The government was wise to put in place anti-speculation measures to prevent a property bubble. These measures are still essential. With interest rates at an all-time low and with the appreciation of the Singapore dollar to fight inflation, this provides the perfect setting for speculative hot money - from both locals and foreign investors who can afford to do so - to flow into the market. Genuine buyers could potentially be edged out of the market.

By removing the anti-speculation measures in one fell swoop, or by acting too quickly in the moderation of future land supply, the same property bubble the government was trying to avoid previously could potentially be brought back into the picture. The current policies should only be reviewed when there is more certainty in its repercussions.

Rohit Dadwal
Managing Director, APAC
Mobile Marketing Association

Property is actually is meant to be a roof over the common man's head. It has been an endeavour by the government here to provide shelter for every citizen and resident in a country with a world-class living environment. I do believe there have been some trade-offs which may be worthwhile revisiting - price being one of the main criteria of an affordable world-class environment. All the measures being introduced are to keep the right balance between property businesses and the common man.

However there is a need for the government and market leaders to continue to make Singapore a livable place, which has been the pillar of its growth in the past.

Singapore wants to be the home of choice of new, potential and current residents who make this the flourishing Red Dot that the country has come to be known as. With housing prices fast going out of the average household's reach, this long-term vision could be difficult to achieve.

This article was first published in The Business Times.

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