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Ensuring stability (Views from the top) February 8, 2011

Filed under: Home Owners,Investors,MND,Singapore Property,URA — Ideal Home SG @ 12:27

Are the new property-cooling measures too much, too little or just right? What more needs to be done to prevent a property bubble developing while keeping the market vibrant?


Sam Yap S G
Group Executive Chairman 
and Co-Founder
Cherie Hearts Group 
International Pte Ltd

I WELCOME the measures taken by the government to curb excessive property speculation, but would suggest that the cooling measures should be better targeted towards the HDB market. This is because HDB flats are taxpayer-subsidised property, which play an important role in nation-building through providing Singaporeans with a shelter and home. They are not intended for profit-making, much less speculation.

On a broader basis, there is scope to tighten the loan-to-valuation ratio for the second property and beyond. In land-scarce Singapore, priority should be given towards ensuring affordable home ownership for all, even if this may mean stifling market vibrancy.


Lee Lung Nien
Chief Operating Officer
Citi Singapore

THE government’s actions were swift and decisive as always. Citi’s view is that the latest measures are likely to have a longer-lasting effect than the previous ones. Except for genuine home buyers and long-term investors, potential buyers are likely to think twice before committing to a property now. We may see a significant fall in transaction volume immediately and believe bids for residential sites will be more cautious.

However, volumes should see a slow recovery after the market has digested the initial shock. With interest rates remaining at record low levels, we also do not think prices will decline significantly in the near term. But if the aim was to slow down further rises in property prices and to set a cap for now, the recent measures would certainly achieve the desired effect.

Pauline Goh
CEO, Singapore and South-east Asia
CB Richard Ellis


THE cooling measures are necessary to soak up the froth in the market to prevent excessive asset inflation. Nevertheless, to weed out speculation further, the government could consider monitoring activities around small format units. The proportion of small format units has been rising in recent years, driven by quantum affordability resulting in price increases.

To help genuine first-time home buyers and upgraders further, the government could also consider relaxing the current monthly household income ceiling of $10,000 for Executive Condominium purchasers, in line with inflation, rising land and construction costs resulting in the overall higher value of ECs since its introduction in 1996.


John Koh
Managing Director
WMRC Private Ltd

I THINK the current property-cooling measures are just right. With an unprecedented flow of money to Asia and an extremely low interest rate environment, asset prices in our region are going up very quickly in record time. 2011 is poised to be a good year for economic growth and many property investors are betting their money on prices to go up even further.

If this uptrend continues in an uncontrolled manner, it could quickly cause an asset bubble which is going to hurt many people and the regional economies when the bubble finally bursts. However, the so-called ‘hot money’ that comes here can also leave us the moment assets and investments overseas are deemed to yield better returns. When that happens, it is prudent for policymakers to also remove the measures quickly to prevent a drastic crash of prices.


David Leong
Managing Director
PeopleWorldwide Consulting Pte Ltd

IT seems that the government finally decided to choose the sledgehammer to knock sense into the market with the 16 per cent punitive seller’s stamp duty (SSD) within the first year of purchase complete with a declining SSD till the fourth year.

The government’s series of cooling-off measures are the most defining and probably most decisive anti-speculation measures in the hope of stabilising prices.

This rule will probably impact the marginal and fringe speculators and these recent measures probably will have a short-term psychological curbing and withholding effect on the market. However, if history is any guide, such a rule would be frustrated in an environment filled with bullishness and liquidity. Irrational exuberance of speculators can trump the government’s curbing measures since loan-to-value (LTV) is of lesser concern to these serious investors who are buying into assets for their yields and will unlikely affect this class of investors with strong holding power.

The recent measure would douse the speculation fire in the primary market, but it would also deter speculation in the secondary market for short-term punters. The SSD has to be set at a punitive rate for it to have any desired effect. The intent is to take out all the incentive in property flipping. Technically and administratively, this is the simplest and most direct way of dealing with speculation for marginal speculation. By cutting into speculative gains for punters, the SSD will hit where it matters.

There is a dearth of properties in Singapore for our gradually growing population and because of our limited land resource, land is always in demand. Over the long run, the price trend for property has an upward bias. At any juncture, rationality must rein in during any bubbling possibility and property prices should move in line with economic fundamentals. Prices should not go awry and off tangent to Singaporeans’ affordability.

HDB’s prices should be the pre-eminent price stabiliser and be kept on a narrow trajectory band. Policies should be designed to ensure that HDB units are not subject to frivolous trading and end up in the trading pits where genuine buyers will be affected. This will cause dissonance and dislocation of wants and affordability among genuine buyers especially the first-time buyers looking to set up their families.

The government should also review the methodology of valuation for HDB where cash-over-valuation (COV) seems to be a constant in the pricing equation. The COV is the cause for the off-tangent overshooting of HDB prices and if there is a tiered levy on this COV for both buyer and seller, it will be a real dampener.

The government’s objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals and not overshoot with an unpredictable trajectory, at least for the HDB new homes. For prices of mid to upper tier properties, the market can decide.


Tan Tiong Cheng
Knight Frank

WHEN residential property prices escalate drastically, they tend to raise concerns about asset bubbles which can have dire consequences when they burst. The flash estimates from URA’s private residential property price index showed an increase of 17.6 per cent year-on-year for 2010. This translates to 65 per cent property price increase over a five-year period. Too soft an approach may perpetuate a growing bubble leading to further cooling measures. Too much may de-stabilise the property market and cause it to crash.

It is too early to tell if the latest measures will have their intended effect. Looking at the Hong Kong government’s Nov 19, 2010 punitive measures on special stamp duty, the immediate impact was drastic; but two months on by January this year, a slight rebound in volume is taking place. The common factors faced by both markets are abundant liquidity and an ultra-low interest rate environment supported by genuine demand from upgraders and liquidity inflows.

What is more important is that the measures should not be viewed as permanent but more a temporary tool to stabilise the market. The government welcomes long-term investors who believe in the Singapore story and not short-term monies swishing around, pushing up prices artificially.

More can be done to tighten loans disbursed to property purchasers. Four in 10 home buyers took out more than one loan and in some cases three, four or more loans. Perhaps we can take a leaf from the United States, Europe and Australia experiences by implementing stress tests for these borrowers. If one can stomach the short-term downside risks, one can enjoy the potential upside returns from long-term property investments.


Patrick Liew
HSR Property Group

TO put these measures into proper perspective, they are not designed to devalue property assets or cause prices to stay flat for a protracted period of time, as that will have a cascading effect on both macroeconomic and microeconomic levels. Should prices not grow in tandem with economic fundamentals, the authorities can withdraw some or all of the measures.

The property measures will not impact the residential property market across the board. It is targeted at removing short-term investors and preventing investors from being overly-geared. In the previous three rounds of measures, we have seen the number of such investors declining and banks becoming more cautious in their lending policies.

The property measures seek to prevent the formation of property bubbles, the bursting of which will have detrimental effects on the economy and society. This is crucial especially since we face the prospect of excessive liquidity flowing into the market from overseas enterprises and investors.

My concern is that many of the investors who have profited from the recent price hike will shift their attention to the industrial and commercial markets. This may have a negative effect on both business costs and the overall competitiveness of our nation.

Considering the fact that the economic fundamentals including the unemployment rate continues to be healthy, there are no reasons why property prices should not increase in the mid to long term – hopefully at a moderated rate. The market continues to be well-supported as indicated in a survey conducted by Propwise which showed that 55 per cent of the long-term investors were ‘keen on making a property investment if prices fell’. The extent of liquidity in the market could very well be underestimated. I personally welcome the introduction of these measures as it will ensure long-term growth for both our industry as well as the economy.


Tan Kok Leong
TKL Consulting

THE property-cooling measures on stamp duty and loan amount are effective in deterring short-term speculators from the market and keeping the market healthier. Demand for homes, however, remain strong owing to economic growth, strong liquidity and low interest rate environment.

Rising interest rate would increase the general cost of business, particularly property developing cost and its holding cost while the buyer would have to pay more for use of money.


Toby Koh 
Group Managing Director
Ademco Security Group

SPECULATORS just ran into a brick wall. The latest measure by the government certainly hit the bull’s eye in curbing the frenzy in property investment. Undoubtedly, the rapid rise in property prices over the last year is not healthy. Aside from the fear of a bubble, affordability by the young and the masses is a major concern.

If Singapore intends to attract the best of breed globally as well as retain local talent, property prices must be reined in. Many of my young talents in Ademco has been expressing their concerns whether they will be able to upgrade their property with current trends. Slow steady growth is the preference and kudos to the government for decisive action.


Joshua Yim
Achieve Group

A GOOD majority of the Singapore population live in HDB flats so I feel that public housing should be regulated such that it is protected from being a speculation vehicle in the property market. The recent regulatory and property tax changes are good initiatives to help insulate it from such speculation. However, I would like to see more of these initiatives targeted at escalating housing prices. I believe that property prices are currently artificially high and so I would also like to see the authorities looking into the statistics of actual occupancy rate of these housing units. Was the market driven by a genuine need of shelter or otherwise is important as it points to the fundamentals underlying the escalating property price phenomenon. We must be wary of a situation like in Dubai where huge numbers of houses are bought up by investors’ speculation and genuinely driven by real needs by the population. Because when the bubble bursts, there would be far-reaching consequences for the economy.


David Low
Futuristic Store Fixtures Pte Ltd

WITH a fourth round of new measures being introduced within a short span of two years, it shows cooling measures are never too much to curb property market movements but more so on stabilising the market to prevent misrepresentation of real market demand. New measures appear to target at second and onwards property purchases in an attempt to tame speculative buys. Speculation is one of the triggers to forming a property bubble so having these set of new measures helps.

The implementation comes in timely to tie in with China’s focus on equalising the economy from the much expected growth and US showing positive signs of recovery. These global movements lay the ground for potential increase in interest rate in the coming periods, so new measures should reasonably contain mass market investors’ greed level to tread with caution thus preparing them for the tougher times ahead instead of banging on excessive liquidity sloshing around especially in Asia. Any additional measures at this stage will potentially hurt first-time home buyers and purchasers for own occupancy. The market will likely cool down gradually and we should see how things pan out in the next two quarters before further intervention.


Dan McConaghy
Vice-President and Managing Director
Fico Asia-Pacific

EXUBERANCE in the property market from genuine buyers is a healthy thing. What we don’t want are speculators who create artificial price bubbles.

The recent round of property-cooling measures was meant to slow down the rate of price increases, prevent a bubble, and of course, cut down on property speculation. However, by putting a cap on maximum financing for second and third properties at 60 per cent, genuine buyers looking to invest for the long term (like retirement) will be hurt. If the market cools as expected as a result of these measures, it will be good to see a loosening of the financing cap from 60 per cent back to 80 per cent.

We applaud the decisive action taken by the government – coupled with the earlier cooling measures – and are optimistic they may have what it takes to cool the market. At Fico, we’ve spent the past two years working with our clients – including two-thirds of the top world banks and 90 of the 100 largest US financial institutions – to recover from the burst of the housing bubble, ensure responsible lending practices and leverage data to better predict consumer behaviour. We have to ensure Singapore avoids a similar fate.


Lim Soon Hock
Managing Director

I CONTEND the new measures will have little or no impact on the high end of the property market, given that the demand from this premium sector is price inelastic. The measures are clearly targeted at speculators to make it more costly from the cash standpoint and to prevent property prices, especially those for the mass market, to be inflated further. In this regard, perhaps the new measures should have been implemented earlier, like six months ago. I read with concern in our local papers recently that quite a significant number of property buyers have more than two loans for the properties that they own, so lowering the amount buyers can borrow from banks is definitely a step in the right direction.

If the new measures do not work to expectations, to prevent a property bubble, the government may want to consider a drastic measure of limiting the purchase of one property per person or per family, if this person is married, for the next one year. This can be an effective stop-gap measure to manage the demand side of the property market to complement the supply side, vis-a-vis the release of land parcels for property development. I believe the market will continue to be vibrant with the strong capital inflows into the country and Singapore’s attractiveness as a choice location to live and work for increasing numbers of foreigners, for now.


Liu Chunlin 
K&C Protective Technologies Pte Ltd

I GUESS the dilemma is having measures which can achieve targeted results, and not be a blunt tool hurting genuine buyers. For the recent measures, I feel the measures are just right. It will favour genuine property buyers including upgraders who consider carefully what they buy. It will certainly discourage short-term flipping speculation.

However, we already hear of such speculative interest shifting to industrial properties not subject to the same controls. Will businesses be next to complain about inflation in industrial properties? Overall, one cannot help the buoyant economy in some parts of our region like China washing up liquidity on our shores. Even the authorities in China and Hong Kong are trying to control the property bubbles there. We should not be less vigilant than pre-emptive efforts in these places, as there will otherwise be regulation ‘arbitrage’ with further speculative interest diverted here.


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

THE new property measures have certainly taken the market by surprise. Regardless of the positivity from most property development companies in the light of these changes, the impact on the housing market has been significant. At the ground level, real estate agents are already witnessing waning interest. For the mass market group, the government will continue to focus on the HDB and resale market. It is a monopolistic supplier market and the government may have some tools to help control prices if they wish.

At the same time, the Executive Condominium (EC) programme has been restarted to cater for the upgraders and middle income groups. These HDB and EC measures will account for about 80 per cent of Singapore’s population, which is the primary target group that the government wants to keep prices affordable for. This leaves the remaining 20 per cent of the population that is more prone to a ‘bubble’ building up. High bidding prices for land parcels purchased in prior years have built in a high price for future sales. We can expect these developments to remain priced at a premium level regardless of future market conditions as these low interest rates enable developers to have the option to gear up cheaply and adopt a ‘wait-and-see’ approach.

The typical policy of raising interest rates to cool the market does not appear to be a preferred option as this would likely hurt the mass market and SME businesses. Raising the stamp duty is more effective than a capital gains tax as the duty is applied to the sale price and not just the profit. As such, this measure should likely curtail speculation quickly. Other measures to cool the market may include quotas on the number of property purchases by a single buyer, or an enforced Know-Your-Client (KYC) style due diligence process (similar to what private banks do to eliminate money laundering) for prospective buyers of premium properties.


Paul Endacott
Managing Director, Singapore

THE latest measures designed to curb speculation will dampen the property market significantly. The measures are logical but of course will be deeply unpopular with property investors and can unfairly penalise those selling their home inside the first few years for purely practical reasons. The Singapore government’s stance, however, is for the greater good of the domestic economy and strikes a sensible balance. The property market can remain vibrant if mortgage interest rates remain low and the government ensures other segments of the economy stay strong. The MAS must maintain the strength of the Singapore dollar but not to the point where property becomes unattractive to foreign investors. Additional incentives targeted at assisting first-time buyers might be considered and home buyers should be allowed continued access to CPF funds for property purchases.


Pinaki Rath
Managing Director
Gold Matrix Resources Pte Ltd

WHAT is worse than property prices going up? It is when they come down. At first glance, the recent measures appear a bit draconian, especially for the mass domestic investor. It may adversely affect sentiment in the property market in the coming months. The crux of the problem lies neither in the low stamp duty nor what buyers can borrow from banks. The problem lies in the effective low interest rates. Not many have bought into or fully understood this yet. Have the latest measures addressed that? Not quite.

Foreign buyers with deep pockets will continue to park themselves in the Singapore property market. These new measures will make no difference to their investment approach. Lest we forget, purchases by foreign investors may even grow without any price increases if our local currency appreciates substantially against their home currencies. So our strong currency and low interest rates are actually contributing to the bubble. Thought needs to be directed at increasing the effective interest rate for home loans to prevent a property bubble.


R Dhinakaran
Managing Director
Jay Gee Enterprises Pte Ltd

THE new measures to deter speculation in property markets are strong and clearly demonstrate the intent of the government. This will have the desired effect and cool the overheated property sector. While these measures will bring in the desired effects, it may take longer than usual to see the effects. The world market is flush with liquidity and this liquidity is seeking best returns at all times. We would need to look at making other sectors of the economy interesting for returns to investor to channelise the funds away from real estate. With continuous increase in business costs the growth and returns in every other sector has been significantly dwarfed by the property sector making it a favourite place for speculation. Measures and incentives to attract retail investments into other sectors will gradually level the playing field making property less attractive for speculation.


Dora Hoan
Group CEO
Best World International Ltd

THE new round of measures to cool the property market is a necessary proactive way to ensure that property prices appreciate in moderation and therefore avoid the risk of a bubble forming. In its core, I believe that the sustained property price spiral is due to the positive outlook on the economy in Singapore and in Asia. As indicators show a Singapore economy on the upswing, better business and job prospects continue to fuel this demand.

A big contributing factor is Singapore’s attractiveness to global investors with its sound infrastructure and political stability. A good number of these investors not only do business but settle here thus creating more demand for luxury residential and commercial projects that push property prices up. A bubble is not evident in the near term but it is a smart move to whip these anti-speculative measures into action to curb potential excesses from distorting an otherwise vibrant and sustainable market based on solid fundamentals.


Lily Kew
Glow International

IN both absolute and relative terms, I feel that the new property measures are quite drastic as the new maximum of 16 per cent for the seller’s stamp duty is a great jump. The timing is also immediate and very sudden. I believe it will be effective in curbing speculation in the property market. However, there is always a time lag between the implementation of the new rules and the effect so it requires time to monitor before we know whether further measures need to be implemented.

Having said that, if we compare this with Hong Kong, which has the most expensive real estate in the region, the new property measures may not appear as drastic. The percentage of foreign investors participating in the recent buying activity is another point worth noting. Because, if a large percentage of the recent property buyers are attributed to overseas investors, that would suggest a genuine interest as these investors are viewing the value of Singapore property relative to other countries.


Teng Yeow Heng Michael
Managing Director
Corporate Turnaround Centre Pte Ltd

THE latest property-cooling measures have been too much. We already read of Singaporean investors now contemplating to invest in overseas property. The rich foreigners will have no problems in acquiring Singapore property despite the higher stamp duties and lower bank loan amount allowed. In addition, these foreigners will eventually have a free hand to own most of the private real estate in Singapore because some of the policies introduced earlier on ownership of HDB flats as well as the latest policy will render it difficult for the average Singaporeans to buy a private property.

The measures so far are too haphazard and unpredictable, that was why they are not working. And the market hates uncertainty. The government should consider working out an econometric model based on the housing pricing index, vacancy and take-up rate, supply of new developments as well as GDP growth, unemployment rate and slap a tariff or stamp duty based on this econometric model. This way, at least, there is some predictability of the increases or decreases in stamp duties going forward. As a privilege and protection to Singaporeans, foreigners should be made to pay higher on such stamp duties or tariff as compared to Singaporeans.



Source: 31st Jan 2011, Business Times

One Response to “Ensuring stability (Views from the top)”

  1. So what’s yours? Drop me an email to share with me on the recent cooling measures.

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