ST : Demand due not just to immigration

Sep 16, 2010

parliament

Demand due not just to immigration

IMMIGRATION is not solely to blame for strong housing demand, National Development Minister Mah Bow Tan said yesterday.

While the influx of new immigrants has been higher than usual, and has contributed to housing demand, it is only one of many demand-determining factors.

The 'sentiment-driven nature of the market' plays an important role, given that buyers bring forward home purchases if they feel prices will continue trending upwards, Mr Mah said.

Broader economic forces that impact overall demand are also at work. And the recent rise in property prices is a reflection of the improved economic outlook and low interest rates, he said.

That is why in the first half of last year - when the outlook was still looking very gloomy - property prices fell despite there being many foreigners and permanent residents here, Mr Mah added.

His reply came in response to a question from Mr Liang Eng Hwa (Holland-Bukit Timah GRC) about why the Ministry of National Development (MND) did not increase flat supply earlier to cater for the increased number of immigrants.

Mr Mah said it would have been 'foolhardy' to continue pushing out flats or land for housing at an increased rate when there was talk of the world entering a depression or a prolonged recession in the first half of last year.

With the economic outlook then uncertain, the MND had to further scale back its housing supply.

'We take a long-term view, but we also need to be cognizant of the short term... We have to be very flexible and view our housing supply in a very pragmatic manner,' Mr Mah said.

The government land sales programme, for example, is reviewed every six months to keep pace with projected demand, both in the short term as well as in the medium to long term, he noted.

Similarly, the number of new flats pushed out by HDB must take into account the long as well as the short term.

Apart from supply side measures, Mr Mah said, demand management initiatives to discourage speculative purchases will tackle current imbalances and help restore some stability in the HDB resale market.

ESTHER TEO