BT : Building confidence

Business Times - 08 Mar 2010

THIS WEEK'S TOPIC
Building confidence

Are concerns over the surge in the property market justified? How effective are the recent measures to moderate the market, and does more need to be done?

Pauline Goh
Managing Director
CB Richard Ellis, Singapore

THE recent anti-speculation measures are mainly targeted at short-term speculation activity and should not affect demand from genuine home buyers as well as medium to long-term investors. In the near term, there may be some minor contraction as speculators are weeded out. The stamp duty - levied on the buyers and sellers of a property transacted within a year from the last transaction - is a major deterrent.

However, homebuyers with an eye on long-term investments or owner-occupation will continue to find Singapore an attractive safe haven with strong fundamentals.

Nirvik Singh
Chairman & CEO
Grey Group Asia Pacific

THE Singapore property market has always been a buoyant one, and has weathered several economic crises with resilience.

Given the recent international sub-prime crisis, the global financial meltdown, and the speculative nature of the property market in general, it is indeed reassuring that the government has decided to implement tightening measures to regulate the market and prevent disparity in terms of rights to ownership.

The seller's stamp duty and loan-to-value limit on housing loans come at a time when demand for housing is on the rise and will ensure that true home-seekers get their chance of owning a home.

Simultaneously, they will serve as a strong check on existing property owners, real estate agents and investors from constant speculation to bring more equity to the property market as a whole.

In the long run, the government's initiatives will lay the foundations for a sustainable and healthy property market for future generations.

Alastair Hughes
CEO
Jones Lang LaSalle

THE Singapore government is sensible to keep a close watch on the residential property market, given the recent experience of other countries, where severe price movements in housing markets have had a destabilising effect on their wider economies.

With Asia leading the global recovery, excessive flows of investment funds into the region are possible - some of which may find its way into the Singapore residential market.

These two latest measures - an additional stamp duty on residential property bought and sold within one year and reducing loan to value ratios from 90 to 80 per cent - are smart as they will reduce returns from property investment for very short-term funds, whilst not affecting existing owner occupiers and long-term investors.

It is difficult to judge at present whether further measures are needed until these have time to take effect. But those considering buying their own home or buying for a long-term investment in Singapore can be confident they are buying in a transparent, well-regulated market.

John Koh
Managing Director
WMRC Private Ltd

PERSONALLY I think the concerns over high property prices are justified. The question is how they should be addressed, and this is where views can be strongly split between those supporting free market forces determining equilibrium prices and those favouring controls to avoid a bubble.

With the financial crisis still fresh in our memory, it is not hard to understand the concern over fast-rising property prices. With many people still wary of financial products, the next logical asset class would be real estate which is considered a tangible asset with long-term value. The government is taking calculated measures against a potential bubble, and depending on how the market reacts as more measures could come in to ensure housing remains affordable for all. Considering that private housing constitutes less than 20 per cent of local residents' needs, I would argue that the control measures would be better directed at public housing rather than private. Private housing provides an avenue for asset allocation and also a means to showcase to foreigners the quality of living standards here. Any artificial controls would undoubtedly deflate buyer interests and take away the dynamic attributes which so rightly characterise the real estate industry.

Ken Sansom
President
Experian Asia Pacific

POST recession from late-2009, residential property prices in Singapore have started to heat up due to relatively low interest rates, strong demand and possibly, some speculative buying for investment purposes. As the world looks to Asia, including Singapore, as one of the key players leading the global economic recovery, it is critical for markets to recognise and manage the risk of an asset bubble at an early stage.

These introduced measures would help towards discouraging short-term speculative activities that distort price-levels for genuine homebuyers. They also serve as good reminders for financial institutes to pay adequate attention to risk management issues, highlighting the need for them to maintain good credit standards.

Liu Chunlin
CEO
K&C Protective Technologies Pte Ltd

THE danger of a property bubble is many-fold. Besides depriving genuine Singaporean buyers, there is the risk of a subsequent collapse which can mire an economy for years to come. Though foreigners are not allowed to buy all types of properties, the fact they can for condominiums and houses on Sentosa Cove will definitely have a knock-on effect on the market here.

Recent measures on the 80 per cent loan limit, tax on early re-sale and release of land will definitely affect the market. I guess the trick is not to swing to the other end of the pendulum. Property price increases must move steadily in tandem with economic growth. Hence for the moment, there is definitely scope for wait-and-see before more measures need to be taken.

Andrea Ross
Managing Director
Robert Walters Singapore

SINGAPORE is becoming a destination of choice and a number of foreigners are making Singapore their home and therefore investing in buying flats and condominiums. Property affects almost everyone from the lower to middle income to those who make property purchases for the sole purpose of investment. It is therefore welcome news that the government is putting adjustments in place to curb speculative activity to protect those individuals who are genuine homebuyers. With the new tiered property tax schedule, lower income families will definitely benefit as they are now required to pay less tax.

With the economy picking up and the return of market confidence, lowering the loan-to-value limit on housing loans from 90 per cent to 80 per cent may not be an effective curb, particularly for the higher income individuals/families and long-term speculators. In addition, it might be a bit of a stretch for the lower income and even some middle-income families as the initial deposit outlay would now be higher. I do however feel that the principle behind the move should be applauded as it is a positive attempt to cool the market, moderate rising property costs and to put a brake on speculative demand. A recent report from NUS claimed that Singapore has achieved a lower housing price to income ratio as compared to Hong Kong and London - which means that the housing provided here is still relatively affordable.

However I do feel that for many speculative buyers, most would probably be flushed with enough capital/cash not to feel the pinch, as seen by recent news reports on rising 'property fever' and packed showrooms despite these measures. Perhaps the government should consider increasing the tax rates for non-owner occupied properties which currently remain at 10 per cent, as surely these are the individuals that are buying and renting property and potentially driving housing prices up.

David Leong
Managing Director
PeopleWorldwide Consulting Pte Ltd

THE loose monetary conditions globally and a pervasive low interest rate regime are partial reasons for the property asset inflation witnessed in Singapore. Without any interventions, the demand and prices could escalate to levels incompatible and inconsistent with the economic realism and fundamentals.

The government's announcement of cooling-off measures like the stamp duties imposition on sellers is at best a dampener. The boom-bust cycles are getting too short and too unpredictable. Cooling measures must be let in to slow down the sudden spike and fall of prices which will otherwise cause shocks to the market. Elements of speculative trading activities must be brought to a low and to reduce short-term arbitrage opportunities which also may cause asset price distortions.

A good way for the government to cool off the market is to work on the supply-side equation by putting up more land sales and leave the market to decide how high it should bid for the property. Any other interventions like minimum holding period before flip or sub-sale tax for uncompleted properties or even capital gain tax in tiered format may be intrusive for a free market.

Today's economic recovery combined with low borrowing costs set off this massive increase in property prices which seemed so right and irresistible to the heartland upgraders.

The HDB prices remained relatively stable with strong resistance to price deterioration during most part of 2008 till first half of 2009 compared with private properties.

Singapore can least afford a run on its property prices as many Singaporeans' fortune are intricately tied to property and prices must be built on firm fundamentals and less of froth. Government's interventionist approach is needed but there must be clarity on the extent of policy tightening so that genuine buyers can factor those policies in their decision making process in the mid to long term.

Tan Kok Leong
Principal
TKL Consulting

THE concerns over the surge in the property are justified as they will help make Singapore a more competitive, equitable and sustainable city to live in. Soaring house prices increase fears of property bubbles, derail economic recovery and make housing more expensive relative to household incomes.

Measures on sellers' stamp duty and loan amounts help to bring awareness to the market that steps to co-ordinate and integrate public and private actions to tackle the property market are always available and could be enforced from time to time. They include interest rates or loans amount adjustments, further tax measures and so on.

Arthur Tan
Director
Dashmesh Singapore Pte Ltd

THE surge in the property market is a function of greater demand which became very obvious in 2007. The global meltdown gave the much needed 'cold water' to cool the market then. The increased population and escalated local economic activities is made worse by the reduction of public housing constructions since the HDB 'over supply' situation ending in 2005-6. There is no need to depress luxurious residential projects. For the mass market, there are several measures to keep a lid on prices without collateral damage to other sectors of the economy. One example is to follow the Australian way: foreigners can only re-sell to locals. Other examples are that PRs should not be allowed to resell their HDB flats within a longer time frame, maybe three to five years? I am sure the authorities have many ideas up their sleeves.

Bek Kheng Lee
Managing Director
Azen Manufacturing Pte Ltd

PERSONALLY, I feel that the recent measures to moderate the market will be limited in its effectiveness. Reducing the loan to value limit from 90 per cent to 80 per cent is not going to have significant impact on cooling the market. After all, to start with, most speculators would have sufficient funds to invest. However, having said this, the mere intention of our local government to lessen the speculative element is good as it clearly signals to speculators that they will not allow the situation to go out of hand.

Having one's own industrial property to carry out operations is very important to the success of a business, since rental does not make economic sense in the long run. Today, every square inch of land is chargeable. For example, many years ago, rental charges were based on covered areas. Now, all open areas within the compound, including grass patches are chargeable. So, it is encouraging to know that our government always takes steps to prevent speculation, hence ensuring that genuine business owners are able to purchase industrial property at a more realistic price.

David Low
CEO
Futuristic Store Fixtures Pte Ltd

SINGAPORE is aggressively reinventing her image as a fun city of quality to live and work in, with new infrastructure and establishments in the pipeline, and this plays a big part in escalating property prices especially for prime developments, drawing speculators and investors local and overseas. Coupled with the current low interest rate environment, demand follows suit.

The recent measures put forth to moderate the market do have some impact but minimally in containing the thriving market. Stamp duty placed on sellers who flip their properties within a year of purchase will only curb speculators but not long term-investors and likewise the reduction in loan to value limit is negligible for investors looking at luxury residential market. Prices will continue to rise with pull factors.

I would suggest putting more specific measures in place, to ensure that genuine home buyers are not put at a disadvantage. Creative policies applicable for different property segments can be applied to protect genuine home buyers while taming speculation without stifling the true value of property in Singapore.

JY Pook
Vice President and Managing Director
FICO Asia Pacific

THE environment over the last two to three years has made it tougher for banks to identify the right kind of customers, as a result of the sub-prime crisis. Despite the economic downturn in most parts of Asia, low interest rates, strong demand and speculation has pushed up property prices, much more than what they are probably worth. The current situation is causing uncertainty and possibly a property bubble. Forward-looking banks with a strong risk management and predictive analytics capability will be able to navigate through this uncertainty with greater precision.

Lim Soon Hock
Managing Director
PLAN-B ICAG Pte Ltd

THE concerns over the surge in the property market are justified. Singapore cannot afford to allow our economy to suffer the similar fate of the sub-prime crisis and go through another round of financial turmoil. It is also imperative that public housing remains affordable for the majority of our population.

The recent measures will compel the short-term speculators, who thrive on thin margins, to think twice before playing in the property market. In this regard, it should be effective.Â

In land-scarce Singapore, property will always appreciate in value; it is a question of timing. Long-term investors will not be deterred by the measures, as the opportunity to make a profit will always be there.

Our government made the right pre-emptive move in taking small steps to curtail speculation and to prevent a property bubble from developing, while allowing sufficient space for the market forces of demand and supply to play. If there is one move which the government can make to stamp speculation, it is releasing more land banks at reasonable prices.

Dora Hoan
Group CEO
Best World International Ltd

THE improving business climate and the desirability of Singapore increases its attractiveness to would-be purchasers of property. The price commanded in the market is the expression of buyers' willingness to own a property in a location that has superb amenities and enviable lifestyle. However, we know what happens when rapid, uncontrolled increases in valuations outpace incomes and other economic factors, and is followed by a slump in price levels. The Japan real estate bubble of the 1990s, the Shanghai property market crash in 2005 and of late, the financial crisis of 2008 were all arguably triggered by real estate bubbles.

Moreover, if you take it from the supply-side view, there is reason to fear that property heating up also causes misallocation of resources - too many resources yielded at peak time followed by underinvestment during the lead-up, which economic experts widely believe to be the cause of the ensuing economic slump. The recently implemented measures are intended to apprehend short-term speculative activity that could distort underlying prices. I believe that we need these simple measures to strike a balance between market recovery while ensuring that the property market is moving alongside and not outpacing it.

Teng Yeow Heng Michael
Managing Director
Corporate Turnaround Centre Pte Ltd

THE concerns over the surge of the property market are unjustified. The concerns should instead be for those Singaporeans who invest in private property that they can ill afford and get into financial trouble when the property bubble bursts. The rise of the property prices is consistent with the economic recovery of Asia which is a good thing and also mainly due to the shortage of HDB apartments. The answer lies in meeting the housing needs of Singaporeans and at the same time attracting foreigners to invest in property here so that Singaporeans who own private property and re-sale HDB flats will have better net worth as their property value appreciates.

The future measures should be to release more land to build HDB apartments and build them quickly for Singaporeans who cannot afford private housing. Currently there are just not enough HDB flats for all Singaporeans and that is why they have to purchase private property causing the prices to surge and at prices that they can ill afford

The recent measures are not effective as recent housing sales launches are still attracting record sales. Also, the recent measures have instead caused the share prices of our property stocks to take a plunge. During this fragile economic recovery, we do not want to send the wrong signals that can cripple the nascent recovery. Currently this policy creates uncertainty in the property and stock market and this is not healthy as investors do not like uncertainties. We should be encouraging the foreign high-net-worth individuals to invest in Singapore property; instead we may be chasing them away to invest elsewhere in Asia because of the uncertainties. These foreign investors have a choice as to where to invest in property. Let us not throw away the baby together with the bath water.

R Dhinakaran
Managing Director
Jay Gee Enterprises Pte Ltd

SINGAPORE'S property market kept growing even during the worst period for the economy in 2009. Singapore's 'safe country' status drew more liquidity into the market during the recessionary period, and with a liberal taxation policy on capital gains, speculative trade became more remunerative than investing in any real economic activity. The key intent from the government is to deter speculators and avoid a bubble which makes it unnecessarily hard on genuine home buyers.

The recent steps by the government will definitely have some impact. The dual stamp duty will make speculation tougher but the reduced loan component will affect more the genuine buyer for owner occupation. To identify and clearly separate the speculators from first time buyers, the government could consider keep the loan value up to 90 per cent while making it tougher for investors and speculators by having the loan amount reduced to even 70 per cent for buyers who already own at least one other property in Singapore. This will perhaps help to keep away speculators while not discouraging young and first time buyers from buying a property for their own living.

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