Property cooling measures: Round 6...?!

By The Folks @PropTalk - May 30, 2012 9 Comments
Buoyant property sales in recent months have sparked fresh concerns that another round of cooling measures may be on the cards despite the last round of measures introduced in December 2011.

Experts said the appetite for home purchases in Singapore is still strong despite several rounds of cooling measures that were introduced by the government.

In fact, property developers have been selling over 2,000 private homes every month in 2012 -- well above the monthly historical average of 1,400 units.

During the last parliament sitting, National Development Minister Khaw Boon Wan told the House that the five rounds of measures implemented between September 2009 and December last year would need more time to cool the property market.

Although property sales are expected to remain above 2,000 units a month over the next few months, experts said it was unlikely that the authorities would introduce another round of cooling measures soon.

Norman Ho, a real estate partner at Rodyk & Davidson, said: "I don't think any cooling measures should come in any further. ... I don't think (capital gains tax) should be implemented because Singapore, being an open economy, ... it actually has a repercussion on the economy.

"It destabilises the economy. It just doesn't affect the purchasing of residential property itself, but it affects the whole outlook of the economy."

Low borrowing rates and a flush of liquidity in the market have been blamed for the buoyant property demand.

Experts said one way to curb demand is to restrict housing loans available for home buyers.

Donald Han, HSR's special advisor, said: "To restrict the number of multiple investments per investor, one possible option would be to look into the loan-to-value ratio.

"That is, if you are looking at your first property for your own occupation, that loan quantum can be as high as 80%. But once you are buying into your second and third property, that could come down to as (low) as 60% or even 30 to 50%."

Nicholas Mark, research head at SLP International, said: "The problem right now in the residential property market is not the level of speculation nor high price growth.

"Prices are stabilising. In fact in some sectors, prices are declining marginally, while the level of speculation has reached a three-year low.

"The problem is actually over-investment -- there is a risk there could be a bubble caused by shoebox apartments."

Analysts said the rising supply of shoebox apartments is one of the factors that is keeping the property sector hot.

By 2015, some 9,700 shoebox apartments are projected to be ready. Eight out of ten apartments will be in the heartlands, an untested market for such apartments that is the size of four car park spaces.

Some analysts have suggested that any possible cooling measures should just be focused on this segment.
Source: Channel News Asia

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9 comments to ''Property cooling measures: Round 6...?!"

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  1. Minister Khaw has a lot of hand wringing and decisions to make.

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  2. I thought some mama Indian chief said got enough tricks to absorb the capital flight here?

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  3. It shouldn't be that surpringsly that property sales by developers are increasing when you factor in the fact that the previous cooling measure essentially killed off the subsale market by imposing tax on early sales. The one who stand to gain is actually developers since the govt indirectly help them kill off their competition (subsale market)

    Instead of simply attempting to do round after round of restriction, better and more logical rules should be made. Another example is the rule that states you must sell private property when buying resale hdb. All that did was to dry up the supply side of the resale market as no one wanted to sell their existing hdb anymore.

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  4. Just to add, ii believe a lot of the cooling measure is there simply because the govt make the first big mistake years ago whereby they didn't build enough flats during the 2005-2010 period. Property prices soar both in the hdb n private sector once the lag started to build up and the govt is now using all sort of measures to attempt to rectify the issues.

    I am not picking for the sake of it. Look at the ec, last one was built in 2005 at woodlands (la casa) and than for about 5 years they didnt build any. Suddenly nowadays every month have a new ec launch. Where is the balance in that? Don't tell me the last 5 years no one needed ec?

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  5. I guess you could say that is the "official" reason.

    My point is simply when you don't build enough flats, whether ec, bto or etc, there will be a shortage. Our population has increase from about 3million in 2000 to bat 5.5million in 2010. A shortage of flat will lead to an increase in price and alternatively lead to alternate living such as mm. I am just taking ec(or the lack of it) as an example of "under building".

    My opinion is that kbw is actively ramping up the supply of flat to curb price and of course to house the new couples. Thus u see the launch of bto and ex almost every other month. Unfortunately base on the high take up rate as seen from 2011 until now, it is fair to say demand still overwhelm supply for now.

    Back to your post, perhaps it would be fair to see that the booming sales of new condo units is not just restricted to the private segment? Anyone can argue that the public sector is experiencing a "boom" of sales as well. Don't see any cooling measure suggested for hdb do you :) .

    Btw enjoy reading your blog, just my two cents worth!

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  6. Construction of buildings take years to complete.. Unlike immigration where a few paperwork here & there and it's complete.. Coupled that Spore is an open economy where property prices fluctuates according to the sentiments of the 'outside' world, it's not easy to determine demand. Imagine if kbw keeps building 20k flats a year (supply), but economic crisis happens & dampens buyers sentiment (demand), prices soon fall but the 20k flats construction are still ongoing! No one buys and this unwittingly create an oversupply of flats... Soon people will complain to kbw why there is an oversupply of flats (which cause price to dampen) when there is an economic crisis...

    Not easy...

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  7. Just to add to my post, govt can only so much control the supply side of the property equation, the demand side is very hard to predict, what more control... So for the ec example, govt had to stop building coz if they continue, it would further depress prices and another group of ppl will then protest..

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  8. I actually agree with you. But ultimately it is the govt job to estimate the demand and judging by how much they are building this year I think it is fair to say they underestimated the demand previously

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  9. Hi jansenboy,
    If govt were to estimate the demand, shouldn't they stop or decrease building of flats now coz of US and Europe crisis are unfolding or happening? Also our economic growth for 2012 is estimated (by analysts) to be only 1-3%! so shouldn't demand be estimated to be low due to the gloomy & uncertain future?

    But hdb flats are always over-subscribed everytime somehow. Could you explain why the demand is so "sticky" despite the gloom & uncertainty?

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