Pauline Goh
Managing Director
CB Richard Ellis Singapore

THE measures are aimed at cooling the market by lowering demand and increasing supply. On the demand side, the removal of the special payment schemes will effectively encourage homebuyers to reassess their cashflow position carefully before they make purchase commitments. Those who have sufficient funds only for the upfront 20 per cent downpayment and are relying on the future sale of their existing homes to help finance their new purchases may now be encouraged to hold back on newly launched projects and possibly look instead to the secondary market including projects that are close to TOP.

On the supply side, the re-introduction of the confirmed list back into the government land sales programme will provide better visibility to the market on the pipeline of future supply.

These measures should help to moderate, to more sustainable levels, the current sales momentum which has escalated since March and looks set to easily exceed the record volume of 14,811 units in 2007.

Laura Deal
Executive Director
The American Chamber of Commerce in Singapore

THE American Chamber of Commerce in Singapore just conducted its eighth annual Business Outlook Survey of US businesses across Asean. As part of this survey, companies rate their satisfaction level with aspects of the business environment of the country in which they operate.

Overall, Singapore is viewed extremely positively by US companies based here as a place to do business. However, for several years, the greatest dissatisfaction has been with the cost of overheads – mainly housing and office leases. In 2008, 74 per cent of the surveyed US companies based in Singapore reported being dissatisfied with housing and office lease costs. In 2009, that number declined to 55 per cent for housing and 47 per cent for office leases. Anecdotally, our members also cite housing and office lease costs as the greatest challenge to planning business expansion in Singapore rather than other countries in the region.

It is crucial for the Singapore government to keep housing and office lease prices low as the country rebounds from the world economic downturn. Through these measures, the government is ensuring that Singapore remains competitive in attracting and keeping foreign companies.

David Leong
Managing Director
PeopleWorldwide Consulting Pte Ltd

HAVING witnessed the burst US property bubble, it is not hard to imagine how those conditions – if not tempered with cooling-off measures by Ministry of National Development – will put Singapore in similar dire straits. Property prices should be aligned with economic fundamentals. With the current spiralling of prices, these are signs of heightened speculative activity with no major shift in economic fundamentals.

The intervention with the immediate withdrawal of the interest absorption scheme (IAS) and interest only loans (IOL) being offered for purchases of uncompleted property developments will halt any frivolous speculations for the moment. However, with the interest rate pedal nailed to the floorboard and remaining so low for such a long time, new money will find properties as good investment options.

Whatever the case, it looks like demand outstrips supply and therefore there is a chasing up of the property prices. Private home sales witnessed strong upswing since February this year when 11 times more homes were sold compared to January’s 108 units. Since then, developers have sold more than 10,000 units, more than double the 4,300 sold in the entire 2008.

All eyes are on the economic performance since should growth turn out weaker than expected, all buyers of property will be chasing the tails of escalating prices with possible capital losses should the market suddenly correct and rebalance. This will create a negative wealth effect traceable to a flattening out or worst, a drop in property prices.

On the other hand, should the recovery maintain its course, interest rates will shoot north and drive up financing cost and this can have serious implications for those who are over-extended with no real money to back their purchase.

The removal of the IAS and IOLs will technically remove the speculative element from the burgeoning sales volume. This is good for mid to long-term genuine homebuyers and investors as it will take out the speculative element in the pricing of the property.

The cooling-off measures by the government will discourage property ‘flippers’ but I suspect that property prices and sales volumes will continue to improve, with a more sustainable pace of increase and with less volatility as hopefully, cool and level heads will prevail.

Reto Isenring
Managing Director
VP Bank (Singapore) Ltd

DEVELOPERS’ launches and sale volume in June 2009 exceeded even the pre-crisis 2007 levels, and while the government initiatives are well-intended at preventing another property bubble, I feel that there was an oversight on the type of property buyers participating in this round of growth.

In the bull market of 2007, property purchases required only 10 per cent cash outlay, and everything else was easily loaned from banks on interest-serving loans. That set the stage for speculation and consequently, the property bubble.

However, the 2009 scenario is dramatically different, as tighter credit policies capped bank loans at 80 per cent loan-to-value. Coupled with a lower valuation to sale price, cash-tight investors and pure speculators were eliminated from the market as the cash capital is drastically higher than before.

Therefore the government measures of removing the interest absorption scheme and interest-only housing loans are only marginally effective.

Instead, I feel that the deciding factor on the behaviour of property buyers will emerge from the leasing market front. Looming pipeline supply amid weak growth foreseen for expatriate population and demand will remain a concern, and if the rental yields decline sharply, there will be a shift in funds from property investments into other potentially more lucrative investments.

Teng Yeow Heng Michael
Managing Director
Corporate Turnaround Centre Pte Ltd

THE measures to cool the property market are not appropriate. The real estate prices have actually not hit the roof yet. Singapore property prices are merely rising in line with what is happening in Asia and also catching up on lost ground.

The funds are currently coming fast and furious into Asia because of the major central banks’ fiscal stimuli a few months ago. We are seeing real estate prices and stock markets rising in many countries in Asia, not just Singapore.

I believe that this escalation of real estate prices is short term as the economic fundamentals are still weak globally. Our government should just let the property market run its course without any interference as it will not be effective in changing market sentiments.

Wee Piew
CEO
HG Metal Manufacturing Ltd

A RECENT report by Savills Singapore shows that quite a number of property sub-sales resulted in substantial losses for owners who sold in Q1 this year. A large number of these owners who suffered losses were short-term speculators. I believe that such losses are the best way to weed out property speculators. Once bitten, they are less likely to try their luck in buying a property and hoping for a quick ‘flip’.

However, in any form of investment, some form of speculation is healthy to create a thriving market where there are ready buyers and sellers. The key is to prevent runaway or excessive speculation.

As such, I believe that the recent government measures to remove interest absorption schemes will help ensure buyers are more ‘genuine’ or have enough resources to buy and hold the property for a longer time horizon.

However, the government must be mindful that it treads a thin line in having to avoid excessive interference in the market, thereby dampening a market which just six months ago was still in the doldrums.

After all, the current property boom, being liquidity driven, is not unique to Singapore as you will see similar trends in Hong Kong and China.

Loi Pok Yen
Group CEO
CWT

RECENT events over the last year has shown that capitalism in its purest form may be flawed. The assumption that markets are efficient and allowing market participants to get ahead of themselves is potentially dangerous.

Singapore’s government has always taken an approach that prevents financial disruptions which may cause damage to the social fabric and destroy the lives of its citizens. I like to consider this capitalism with a conscience.

The recent measures present buyers and sellers with a different perspective – the government’s. Being able to talk down the market without resorting to monetary policy is always the preferred route. Whether it can be effective in the long run, however, remains to be seen.

Kelvin Lum
Executive Director
LC Development Ltd

THE effectiveness of the recently announced government measures to cool the property market will probably be more evident in the upcoming expected launches till year-end which supposedly will yield about 3,700 units.

The run-up in prices for the mass to mid-market sectors might also start to face resistance from the recent price surge as well as talk about a slowing equity market. From a global perspective, the Federal Reserve’s decision to maintain measures to support the fragile US economy suggests that fundamentals still remain weak, and ultimately would have an impact on other major Asian economies.

These factors, coupled with the recent measures, might possibly dampen the sentiment among speculators but genuine home buyers could still support buying interest in homes as they are likely to be undeterred by the removal of the IAS and IOL.

Lim Soon Hock
Managing Director
Plan-B ICAG Pte Ltd

PEOPLE believe that the economy is finally turning around. They base this on the positive economic growth data across the globe and the rally in the stock market. Anticipating that property prices will likewise increase, they are buying now, including speculators.

I believe that the government’s actions are not targeted at the genuine buyers, for example the HDB upgraders and en bloc sellers, but rather the unscrupulous speculators. However, in the current somewhat buoyant environment, where there is demand, the government’s hand in curbing speculation is weak relative to market forces, as was seen in recent property launches after the government’s intervention.

That said, as a result of the measures, I expect price increases will be gradual, rather than spiralling to dizzying heights, that were seen pre-financial crisis.

Alastair Hughes
Chief Executive Officer – Asia-Pacific
Jones Lang LaSalle

THE announcement of the measures was intended to send a strong signal to the market that the government will step in to balance supply and demand to avoid an overheating of the property market and curb speculation.

In the weeks following the announcement, it has not created any significant knee-jerk reactions in the market and there has been no evidence of any significant reduction in demand. It has, however, made the market sit up and assess the current pricing.

The real test of the effectiveness of these measures will be in the medium to long term. A number of factors come into consideration, including the recovery prospects of the global economy, which will have an impact on Singapore; as well as the financial strength and affordability of developers and homebuyers respectively. How these factors play out will determine whether the government needs to re-evaluate its stance.

Maintaining a stable property market with regulatory transparency and consistency is important for Singapore to keep its position as a regional business hub and therefore, a combination of market forces plus prudent central influence on demand and supply is a recipe for success.

Liu Chunlin
CEO
K&C Protective Technologies Pte Ltd

I THINK that the measures are good. But the issues are more complex than just cooling the market. There are other concerns to be addressed and the baby should not be thrown out with the bath water.

For example, there are genuine buyers, especially HDB upgraders who have held back over the last one year or so. Some of them may be hit by financial difficulties after committing to a purchase and they would need help.

There will inevitably be speculation or flipping, and certainly we want to avoid the debilitating effect of an asset bubble, especially as Singapore is a small market. And nobody wants the property market to be manipulated to the detriment of the genuine buyers.

In essence, the government has intervened by being one of the players, and a significant player at that, in its role as regulator and major supplier of land.

Krishna Ramachandra
Managing Director
Arfat Selvam Alliance LLC

THE recent measures adopted by the government are just about perfectly weighted. I say this because these measures have the clear intent of signalling to the market that a firm interventionist approach is still on hand, and yet the measures adopted are not really going to shock the market and send it into free fall.

These measures have not and will not seriously hurt the players in the property market. But what they have done is diffuse the uneasiness that surrounds the phenomenal rise in property prices. Clearly, the government has learnt from past experiences that any intervention has to be appropriate in what it intends to achieve but more importantly, the timing of such intervention is critical.

The economy is still very fragile – and still yearning for positivism – and as such, if the intervention was any harsher than what has already been instituted, it would have been an over-kill. So ‘well done’ to the policymakers in getting this one just right.

Jimmie Lee
Chairman
Dynaforce International Pte Ltd

AS a property owner, I would love to see prices continue to escalate (albeit in a more realistic manner). But I am also a potential buyer because property is now one of the safer investments. So as a potential buyer, I am glad to see that the government making this move. In a ‘guided’ economy like Singapore, it is definitely the right message at the right time. But we have also seen that it has not tamed the raging bull.

Not unexpectedly, we see the media roped in to accentuate the message. The press has listed the average loss that buyers of luxury apartments suffered. The teacher has taken out the cane and whacked it on the table. He’s got our attention and we know his intentions. But like my old classmates in ACS, many will still be itching to test the limit.

R Dhinakaran
Managing Director
Jay Gee Enterprises Pte Ltd

THE high volatility and frequent swings in Singapore’s property market is perhaps a combined function of its small land mass, present high liquidity in the market and rampant speculative behaviour.

While demand and supply in its own course can correct much of these anomalies in a fairly large market, the scarce land resource buoyed by speculative interests often leads to a panic situation among genuine buyers.

The recent announcement is aimed to make buyers think on their longer-term financial liabilities than to look at property as short-term investment.

While it is definitely a step in the right direction, it addresses the speculative behaviour only partially. Similar to the stock market, a more elaborate framework to desist ‘insider trading’ and conflict of interest would help in further limiting speculation.

Additional taxes on gains made from frequent speculative trading activities will help in curbing this behaviour to some extent.

Deb Dutta
Vice-President – Asia-Pacific
Brocade

IN the near term, these measures will cool off rising property prices. However, when the property market takes a beating, these same measures will be relaxed again to encourage existing home owners to upgrade and new owners to buy. Within a year since the financial market meltdown, this is the second time that the government has proposed mitigating measures to regulate the property market.

Increasing land supply means more property developments in the pipeline and therefore more jobs. All these are good. However, Singapore is just one small island with a finite supply of land. Land reclamation is one way to increase land area while urban renewal is another to clear out the old buildings for taller and swankier-looking high-rise residences, at the expense of heritage and nature conservation.

The government may like to take a step back and revisit the property market from both genuine home owners and investors’ view points, so that a longer-term and more sustainable measure that works for both groups of buyers can be put in place.

David Low
CEO
Futuristic Store Fixtures Pte Ltd

THE recession may now be recent history but fundamentally, the world at large is still experiencing slow growth. Yet property transactions are rife and mirror that of peak times in 2007 despite a polar economic setting. This is an interesting phenomenon that seems to defy financial sense, and calls for more in-depth study.

For a start, there is an urgent need to marry market fundamentals with sentiments to moderate rife speculation which could otherwise lead to another burst property bubble or worse, will create a depression.

What the government is doing to tame investment and speculative property purchases is certainly timely. Measures such as the removal of the interest absorption scheme and interest only housing loans are certainly effective as a wake up call to mass market buyers who are hoping to make a pile from speculation that may well be beyond their financial call. This will help to moderate advanced cash spending and prevent an alarmingly high-debt society from forming.

Dora Hoan
Group CEO
Best World International Ltd

THE Singapore property sector is in the midst of a boom quite like that of 2007, when we made headlines as the world’s hottest real estate market. There is a confluence of factors that has triggered the returning frenzy and I believe that many of them are positive. Singapore is recognised as the top destination in which to do business. Such a bright prospect is made even more vibrant by signs of global economic recovery, the stock market rally, the imminent completion of massive casino resorts, low interest rates and a search for more stable, alternative investments – all these contributed to encourage property buying.

While speculation is inevitable for any market, the government has done well in acting quickly to temper the heightened exuberance which may result in a speculative bubble that will be hazardous for both Singapore and the region. We do not need much memory refreshing to realise that a red hot property market can go out of bounds and mimic what happened in the United States before the sub-prime crisis. I believe however that if we remain upbeat but cautious, we can seize opportunities here in positive light.

Source : Business Times – 28 Sep 2009

Strong sales volume has been the cause for the government’s concern that a bubble was building up, says HAN HUAN MEI

DEFYING all expectations, Singapore’s residential property market has rebounded in the thick of the worst recession the country has seen. Buyers turned up in droves at recent project launches, sending the home sales figures in July to its highest level since the peak in June 2007. New home sales between January and August were just 21 per cent below the total number of homes sold for the whole of 2007.

But going forward, prices of mass market and mid-tier projects are expected to face some resistance. The number of launches is also expected to be limited for the rest of the year. Even as the market was debating the outlook, the government announced anti-speculative measures mid-month which makes it almost certain that sales volume and prices will moderate.

The robust residential market of the past few months seemed to mirror the peak in 2007, notwithstanding the recession. Market sentiment ran high as the stockmarket rally continued for four months starting in March. The strong take-up of new homes, led by mass-market projects back in February, filtered up to the mid-tier segment by April and to the prime segment by May.

Buyers have been prowling showflats, concerned that home prices may be rising again after having corrected from peak levels. It appears that what started out as pent- up demand progressed into investment demand, and to some extent, speculative demand. Developers launched 10,496 new homes for sale from January to August, compared to 6,107 units in 2008. The total number of new homes sold up to end-August was 11,721 units, far exceeding the 4,264 new homes that were sold in all of 2008.

Buoyed by the stockmarket rally, developers seized the opportunity to launch several mass market projects and found ready buyers. Mainly HDB upgraders, they made up 51 per cent of buyers of new homes in the first eight months of 2009. The number of new homes sold in August was a decent 1,699 units as strong sentiment continued to support the residential market. Including the 2,772 units sold in July, a total of 4,471 units were sold in the two months, which will probably add up to 5,200 units by the end of the third quarter. This would likely exceed the 5,129 units sold in Q2 of 2007, the highest recorded number of new homes sold in a quarter.

The projects that performed well in Q3 were Trevista with 461 units sold at a median price of $943 per sq ft (psf), Optima @ Tanah Merah with 294 units sold at $830 psf, The Gale with 293 units sold at $710 psf and Oasis @ Elias with 150 units sold at $640 psf. In the mid-tier segment, Meadows @ Peirce sold 329 units at $900 psf, Ascentia Sky with 148 units sold at $1,230 psf and Airstream in St Michael’s Road, with all 70 units sold at $1,085 psf. Within the prime districts, Sophia Residences sold 210 units at $1,550 psf, Viva sold 203 units at $1,537 psf and Volari sold 82 units at $2,058 psf.

There was continued interest in high-end investment grade properties as evidenced by the sale of seven units each in The Orchard Residences ($2,720 psf-$4,099 psf) and Nassim Park Residences ($2,782 psf-$3,453 psf) and 11 units in The Hamilton Scotts ($2,300 psf-$3,313 psf). Property prices have been stable in Q2 and Q3, with some upside seen in projects with brisk sales.

The strong sales volume has been the cause for the government’s concern that a bubble was building up in the residential property market. Hence, the implementation of the measures on Sept 14 to ensure the stability of the property market. The measures include the immediate removal of the interest absorption scheme (IAS) and interest-only housing loans (IOL) scheme for projects yet to be launched. This will dampen speculation and put a check on rising prices from the escalating sales volume.

The re-introduction of the confirmed list in the government land sales programme for the first half of 2010 will ease fears of a supply shortage. The non-extension of Budget assistance measures also signalled the government’s confidence that the residential market is sufficiently resilient to weather the current financial crisis.

Prices of mass market and mid-tier projects could face some resistance in the last three months of the year. Based on the caveats lodged in Q3, the median price of new non-landed leasehold homes was $916,000 ($769 psf), 11 per cent higher than the $825,000 ($660 psf) registered in Q2.

This could be attributed to projects like Double Bay Residences, Livia, Optima @ Tanah Merah, Trevista and Waterfront Keys. As for new freehold homes, the price jump was 32.2 per cent from $1.06 million ($949 psf) to $1.4 million ($1,241 psf) because more of the projects launched were located in the prime districts. Examples include Sophia Residences, Viva and Volari.

The number of launches is expected to remain limited for the rest of the year. Median prices of new luxury homes in districts 9 and 10 may have risen 18 per cent to $2,700 psf in Q3 from the previous quarter. But they remain about 28 per cent below the 2007 peak of $3,750 psf. Developers appear to be in a good position to hold off luxury launches for the time being, considering the high price they have paid for the land and current construction costs.

They will continue to launch mass market and mid-tier projects, which are more affordable, now that the IAS and IOL schemes have been removed. Home buyers who only have sufficient funds for the upfront 20 per cent downpayment will probably hold back on buying any newly launched projects and look instead to projects close to completion so that they can sell their existing home to finance the new purchase.

Home prices and sales volume will be moderated to more sustainable levels with less volatility. New home sales for the full year should exceed 14,000 units with a possibility of surpassing the market peak of 14,811 units in 2007. Certainly, further price increases for the rest of the year will be held in check.

The writer is associate director, CBRE Research

Source : Business Times – 24 Sep 2009

Increased sales strongly suggest that buyers are convinced property prices have bottomed, or are low enough for them to re-enter the market, writes EMILY ENG

GIVEN the recent euphoria in the residential market, it is no surprise that it has become a hot topic of discussion. Isn’t Singapore still in recession, people wonder. Unemployment is still high, with an estimated 116,600 jobless residents as at June this year.

And while gross domestic product (GDP) forecasts have been revised upwards from an initial minus 9 per cent to the current minus 4 per cent, the ‘improvement’ is still a negative figure. But none of this has dampened the buoyant mood of buyers and the flurry of launches.

So what’s driving this burst of buying, and is speculation rampant? We take a look at the situation, with our focus on the upper-mid to high-end segment where prices average $1,500 per sq ft.

First, we compare the recent bullish market to the boom of 2007. Two years ago, the activity had started in the high-end segment, driven by foreigners eager to buy into Singapore due to the good job done promoting the city.

The buzz surrounding the two planned integrated resorts (IRs) helped boost Singapore’s appeal, leading to a record number of foreigners buying private property here.

This, coupled with pent-up demand, led the market to experience one of its most active years, with 14,811 new units sold during the year. Speculation quickly came into the picture, and the government abolished the deferred payment scheme to rein it in. But it was the global financial crisis that eventually brought the market to a standstill.

The current bull run started in the mass market where pent-up demand pushed up sales after a dry spell of almost six months following the collapse of Lehman Brothers. The successful launch of Caspian in Jurong West and Double Bay Residences in Simei gave rise to renewed confidence in the property market, and the optimism filtered up to the higher-end segment.

Verdure at Holland Road was among the first upmarket projects to launch amid some uncertainty. When it achieved strong sales, other developers began to push out their projects. In all, developers sold over 10,000 units between January and July this year.

There are two key differences between now and 2007 – what drove the sales, and the price levels set. The earlier boom was driven by foreigners, and the buying helped set new record prices. It was also a bull run that was long overdue. After the Sars crisis in 2003, the market had taken three long years to recover and eventually saw its peak in Q1 2008.

Today, prices are closer to the levels of Q4 2006. When prices are at this level, the number of buyers begins to rise. The increased sales strongly suggest that buyers are convinced property prices have bottomed, or are low enough for them to re-enter the market.

Have prices peaked?

Now that prices have been rising for some months, the question is: Have they reached the peak of 2007/2008?

The table shows a basket of projects sold from 2007 to 2009, comprising a mix of completed and uncompleted projects in districts 9, 10 and 11.

It shows that the highest prices were achieved in 2008, with a handful of projects hitting their highs in 2007. This analysis shows that prices today have yet to reach the previous peak, nor are they anywhere close. This coincides with the Core Central Region (CCR) price index of Q2 2009, which shows we are still 28 per cent off the peak of Q1 2008.

To reinforce the point, we compare prices of recent launches to other projects in the vicinity. Some examples are:

# One Devonshire (launched in June) averaged $1,800 per sq ft (psf); whereas The Metz along the same road averaged $2,222 psf and St Thomas Suites nearby averaged $1,848 in 2008.

# The Lincoln Residences (launched in March) averaged $1,173, compared to Park Infinia which averaged $1,400 psf in 2008.

# Verdure (launched in April) averaged $1,400 psf, compared to Waterfall Gardens at Farrer Road which launched in 2007 at $1,500 psf.

So it is the recent spike in property launches and the stunning take-up that has given rise to the perception that speculators are back in full force. But are they?

Speculation is best measured by the number of sub-sales in the market, as speculators are unlikely to hold on to their properties beyond three months. Speculative activity prompted the government to abolish the deferred payment scheme in 2007. Today, it is the interest absorption scheme (IAS) that has been withdrawn.

However, the impact is expected to be minimal as recent projects that did well – among them, Madison Residences, Viva, Volari, Sophia Residences, One Devonshire, Ascentia Sky, The Wharf Residences and Martin Place Residences – saw only an estimated 10-30 per cent of buyers taking up the scheme.

In fact, projects such as Ferrell Residences, The Trizon and Nathan Residences do not offer IAS and their sales have not been affected.

But we notice that some short- term investors have made their appearance at mid-tier launches, especially for units priced around $800,000 and below.

However, the majority of these buyers bought their units under the progressive payment scheme. This shows that they are prepared to take on a bank loan and service instalments. This is certainly not the pattern of a typical speculator.

Is the recovery sustainable?

The current market has outperformed expectations, to the surprise of observers who could not have envisaged such a recovery six months ago. While some wonder if a bubble is forming, we feel reassured by the fact that most buyers in this upturn are upgraders and genuine home owners, going by the reception to mass-market launches.

The rental market has softened over the past year and has dropped 20 per cent from its peak in Q2 2008. The rental yield had ranged from 4-7 per cent in the last three years. We expect yields to drop to 2-4 per cent from here. Is this bad? Not necessarily, as the market has traditionally offered these lower ranges.

In the primary market, mass-market projects have been pushed out so quickly that there are few remaining parcels left in the pipeline. The confirmed land sales, which will resume next year, is timely, and if carried out in a measured manner, will provide a steady supply of launches and corresponding take-up.

The stock market, after a turbulent year, has finally stabilised. Employment is also expected to improve as firms start hiring again.

We expect prices to stabilise from here after recovering from the under- valuation at the start of the year. Prices are expected to start rising again in mid-2010 when the two integrated resorts are due to be completed.

The market had benefited from the ‘IR effect’ when it was announced in 2006 and the excitement continued to boost the market into 2007.

Now, with the impending completion of the two mega projects, we believe the market will once again be able to capitalise on the buzz, leading property prices higher by 10-15 per cent.

The writer is associate director, residential project marketing & consultancy, Knight Frank

Source : Business Times – 24 Sep 2009

Changing policies as market conditions change reflects pragmatic and adaptive policymaking which should be applauded

THE big picture driver of real estate wherever is the economy. A residential property buyer pays a certain amount for a particular location because he likes to work, live and play there. Should Singapore execute successfully on mega projects like the integrated resorts, improve her infrastructure, grow her economy and become an increasingly important global city, the trend for property prices is up.

But how fast should prices rise? Is there excessive speculation in the Singapore private residential property market? These are tricky questions and governments everywhere, through their policies, play a major role in impacting the property market. Recently, the Singapore government, acting to pre-empt any speculative bubble from forming, unveiled both supply measures such as reinstating the confirmed list of land sales in the first half of 2010 and demand measures such as disallowing the interest-absorption plan and interest-only loans being offered to buyers of uncompleted private homes.

Changing policies as market conditions change reflects pragmatic and adaptive policymaking which should be applauded. Moreover, well-timed pre-emptive moves deserve the most kudos. However, perhaps there is a case for adopting a framework where only supply measures change while demand measures remain unchanged. This is not just about letting free market forces reign as adopting such a stand creates more certainty for developers and property buyers, both of whom are committing to sizeable investments. Whenever large sums of investment are being made, consistent regulations are called for and the residential property market should be no exception. For example, let’s be clear whether we want schemes like deferred payment or interest absorption all the time, not at all, or some of the time.

Perhaps what we really need to focus on is putting in place the set of demand measures that works best for Singapore taking into account various factors. These can range from affordability of homes, wealth creation through real estate acting as a store of value, promoting home ownership, and making Singapore an attractive investment destination. It may be timely to launch an extensive consultation process and have an informed debate that addresses a spectrum of questions, several of which are highlighted below.

How do we want to treat pre-sales of uncompleted residential projects? At one extreme, allow developers to sell projects only after obtaining a temporary occupation permit (TOP). At the other extreme, let the free market rule and allow developers to sell projects well ahead of completion, accept however a low initial payment and offer, whether on their own or in partnership with financial institutions, whatever financing scheme. My take is that, for uncompleted developments, it may be better to allow developers to start selling units at a fairly advanced stage of a project’s construction.

After setting an appropriate level of initial payment, let developers and banks have flexibility on payment and financing schemes but give purchasers a maximum window of say 6-12 months between making initial payment and full payment upon completion. This should better ensure that buyers committing to a unit have the financial means to complete and are not just banking on having a 2-3 year time period in which to flip their properties.

What is our stand on investors? Residential properties after all provide accommodation needs as well as act as investment instruments. The issue here touches on how much of residential property should be in the hands of owner occupiers versus investors, and whether the rich can potentially own too large a chunk of private residential property. My take is to have no capital gains tax on all sales of residential properties but perhaps impose much higher property taxes for owners of luxury properties or serial property owners possibly defined to mean persons owning five or more residential properties.

What about foreigners buying property and do we differentiate here between foreigners and permanent residents? At its core, this question drives at what sort of priority, if any, citizens should enjoy in the private residential property market. The issue here is that of Singapore Inc versus Singapore Home and what role we want private residential property to play in getting this balance right. I think the answer may be to give flexibility to foreigners residing in Singapore to buy property as these people contribute to our economy while being more restrictive on other foreigners buying residential properties here. Perhaps we can restrict the number of residential properties a non-permanent resident can own and bar such persons from buying properties that are below a certain absolute dollar value.

A most critical and tricky question is what is the right role of public housing? A bold rethink here of current policy could be timely. In the early years of nationhood, the building of HDB flats helped in giving Singaporeans a stake in this fledging island state and modernising the cityscape. But amid progress and a more demanding population, should HDB flats get fancier so as to be equivalent to private condominiums? What is the right income ceiling to apply to first-time buyers of HDB flats? What exactly should the government subsidise in the HDB segment?

Perhaps instead of housing 70-80 per cent of the population in HDB flats, let’s move as rapidly as practicable to having 20-30 per cent of the population housed in HDB flats. With the modern metropolis that we are and the first world living standards that we enjoy, let public housing serve the needs of those who really need help. For young citizens of Singapore, consider giving a housing grant instead. Helping young people get a foothold in the private residential property market could be a precious advantage that the value of citizenships confers.

Certainly, there is plenty to debate about whether the combination of liquidity, forthcoming opening of integrated resorts, and green shoots appearing in the global and Singapore economy are good reasons for the Singapore private residential market to stage an unexpectedly strong recovery given the hit the economy here, and globally, has taken. There is also much for investors to grapple with on the residential market’s prospects and whether to play that through property stocks of physical property. But amid all this discussion, let’s think about the long term, about whether supply-only measures work and about the right framework for Singapore’s residential property market.

Leslie Yee is a Hong Kong-based real estate executive with extensive experience in the Singapore property market

Source : Business Times – 24 Sep 2009