Sep 30, 2010
Fresh steps to cool China's property market
BEIJING: China yesterday announced it had taken further steps to cool its red-hot property market, ordering banks not to provide loans for third or more home purchases.
The new measures are aimed at preventing house prices from rising too fast, the State Council, or Cabinet, said in a statement, amid fears of a speculative bubble that analysts say could derail the world's second largest economy.
The State Council said down-payments on all home purchases would now have to be at least 30 per cent. It also limited the number of homes that people can buy in cities where prices are too high, have risen too quickly or where supply is tight.
In April, Beijing announced it would increase deposits on first homes of over 90 sq m to 30 per cent from 20 per cent. Prior to April, all first-time buyers had to make a deposit of 20 per cent.
The new measures urged banks to strengthen their oversight of consumer loans, banning them from being used to buy homes.
The State Council also called for a trial property tax reform now being carried out in some cities to be sped up and gradually expanded to the whole of China. This is widely expected to entail an expansion of the tax on commercial real estate to cover residential houses.
'The new measures are not dramatic, but they convey a clear policy message: Beijing is serious about controlling property prices,' Mr Qu Hongbin, a Hong Kong-based economist with HSBC Holdings, said in e-mailed comments yesterday. 'This should help dampen the expectations' that housing prices will rise quickly, he said.
The new measures are the latest in a series issued this year to try and prevent the property market from overheating.
Official data has suggested that these efforts have started to pay off, with growth in China's property prices slowing for the fourth straight month in August.
But the government has eschewed draconian measures, anxious not to topple a vital pillar of the economy. Real estate accounts for a quarter of investment and 10 per cent of total output.
AGENCE FRANCE-PRESSE, BLOOMBERG, REUTERS
Thursday, September 30, 2010
ST : Site of 'showbiz central' up for sale
Sep 30, 2010
Site of 'showbiz central' up for sale
THE site of the old Singapura Theatre that served as showbiz central for thousands of Malay and Indian movie fans is up for sale at $45 million.
In its heyday in the 1970s, the cinema in Geylang Serai was ablaze with neon signs and colourful posters proclaiming the latest Hindustani and Malay hits.
It closed in 1985, reportedly because of competition from the video industry. It was turned into a furniture exhibition centre and later a temporary shopping complex.
Owner Shaw Brothers renovated the three-storey building in 1992, and the cinema screened Tamil movies for a while.
The building has been only partly used for the past couple of years. A section of the first floor is leased to a foodcourt while the rest is taken up by an entertainment centre that also occupies the second floor. The third floor is vacant.
Shaw Brothers wants to sell the freehold site at No. 55 Changi Road in order to capitalise on the rejuvenation of the Paya Lebar area, said marketing agent Knight Frank.
The land is next to the upcoming Paya Lebar Central, a commercial hub to be developed as part of the Urban Redevelopment Authority's decentralisation strategy to provide alternative zones for businesses.
It is also near the Paya Lebar station on the Circle Line and the Eunos station on the East West Line.
The asking price of $45 million translates to a land price of $769 per sq ft (psf) on the potential gross floor area of about 58,490 sq ft.
No development charge is payable, Knight Frank said.
The regular-shaped plot sits on a land area of about 19,497 sq ft. Under the 2008 Master Plan, it is zoned for commercial use at a plot ratio of 3.0.
'The site is not fully built-up currently. It is likely to be torn down and can be redeveloped into a taller building subject to approval,' said Mr Ian Loh, Knight Frank's senior manager, investment.
He said the site would be suitable for a superstore like Courts or a private school.
The tender closes on Nov 11.
JOYCE TEO
In its heyday in the 1970s, the Singapura Theatre in Geylang Serai was ablaze with neon signs and colourful posters proclaiming the latest Hindustani and Malay hits. -- PHOTO: KNIGHT FRANK
Site of 'showbiz central' up for sale
THE site of the old Singapura Theatre that served as showbiz central for thousands of Malay and Indian movie fans is up for sale at $45 million.
In its heyday in the 1970s, the cinema in Geylang Serai was ablaze with neon signs and colourful posters proclaiming the latest Hindustani and Malay hits.
It closed in 1985, reportedly because of competition from the video industry. It was turned into a furniture exhibition centre and later a temporary shopping complex.
Owner Shaw Brothers renovated the three-storey building in 1992, and the cinema screened Tamil movies for a while.
The building has been only partly used for the past couple of years. A section of the first floor is leased to a foodcourt while the rest is taken up by an entertainment centre that also occupies the second floor. The third floor is vacant.
Shaw Brothers wants to sell the freehold site at No. 55 Changi Road in order to capitalise on the rejuvenation of the Paya Lebar area, said marketing agent Knight Frank.
The land is next to the upcoming Paya Lebar Central, a commercial hub to be developed as part of the Urban Redevelopment Authority's decentralisation strategy to provide alternative zones for businesses.
It is also near the Paya Lebar station on the Circle Line and the Eunos station on the East West Line.
The asking price of $45 million translates to a land price of $769 per sq ft (psf) on the potential gross floor area of about 58,490 sq ft.
No development charge is payable, Knight Frank said.
The regular-shaped plot sits on a land area of about 19,497 sq ft. Under the 2008 Master Plan, it is zoned for commercial use at a plot ratio of 3.0.
'The site is not fully built-up currently. It is likely to be torn down and can be redeveloped into a taller building subject to approval,' said Mr Ian Loh, Knight Frank's senior manager, investment.
He said the site would be suitable for a superstore like Courts or a private school.
The tender closes on Nov 11.
JOYCE TEO
In its heyday in the 1970s, the Singapura Theatre in Geylang Serai was ablaze with neon signs and colourful posters proclaiming the latest Hindustani and Malay hits. -- PHOTO: KNIGHT FRANK
ST : Lifestyle hub a buffer for Serangoon Gardens residents
Sep 30, 2010
Lifestyle hub a buffer for Serangoon Gardens residents
Sited next to workers' dorm, it aims to offer family-centric activities
By Jessica Lim & Cheryl Ong
COMING up next to the controversial foreign workers' dormitory in Serangoon Gardens: a lifestyle centre with art workshops, drama studios and sports facilities.
The $1 million refurbishment of the Lifestyle Hub @ Burghley includes building a carpark, renovating existing buildings and constructing sheltered walkways. It is likely to be ready next month.
The centre's operator, Hean Nerng Facilities Management, was awarded the tender by the Singapore Land Authority (SLA) in June.
The subsidiary of LHN Group, which manages more than 10 properties including residential and commercial properties, said there are 15 units available for rent. A list of prospective tenants is awaiting SLA's approval, but so far none of them had been given units.
The 6,880 sq m site - slightly larger than a football field - is about 15m away from the dormitory and is separated from it by a fence about 2m high.The site, a sub-plot of the old Serangoon Garden Technical School, currently has three single-storey blocks with a gross floor area of about 1,900 sq m. The rest of the former school compound now houses the controversial foreign workers' dormitory.
Residents in the area were upset when the Government proposed building the dormitory there two years ago. More than 1,400 residents petitioned against it, citing concerns that it would increase crime rates and lower their property values.
To address the problem, the quarters took in 600 workers to prevent the area from becoming overcrowded. An access road was also built so the workers would not have to go through the estate to get to the dormitory.
The lifestyle centre was, in fact, 'deliberately carved out to form a buffer between the dorm and the residential areas in Serangoon Gardens', said Member of Parliament for the area Lim Hwee Hua, who had previously met residents to allay their fears.
The member of the Aljunied GRC team pointed out that there is no direct access between the centre and the dorm. Describing the new hub as 'largely family-centric', she said pains were taken to ensure that businesses in the centre would be compatible with the surrounding residential area. 'We were concerned about potential traffic issues if too many people were to descend onto this area, or if there were noise and other disruption to the residents,' she said.
The site is approved for art schools and studios, and for sports facilities such as tennis and squash courts. It is not approved for retail or food and beverage outlets.
However, this might be exactly the problem for the new sub-tenants there, said property developers.
Research director Colin Tan of Chesterton Suntec International said it might be tough for tenants to succeed unless they can attract those who live beyond the estate.
'The catchment is quite restricted to people who drive or those who live nearby,' he said. 'Tenants have to be quite well known to draw people from outside the estate.' The short lease, he added, made it a challenge for them to establish themselves in the area.
Hean Herng's initial lease agreement is for two years, but can be renewed until 2014. The company was the only bidder. It offered to pay $21,008 a month, more than $6,000 above the estimate given by the SLA.
Residents have been enthusiastic about the centre.
Retired teacher Rajakrishnan, 71, who lives a minute's walk away from the centre, said: 'We have a lot of retired folk in this area so it'll be good if we don't have to travel too far to participate in activities. It's just a hop, skip and jump away from my home.'
Asked about the dormitory, she said: 'The situation is not bad at all. The fence around it has helped to keep the workers from coming into our estate. None of my neighbours has grouses against the foreign workers. The hub will be in between us and the dorm - it helps things.'
Others such as retiree John Leow, who chaired a residents' committee on the dormitory issue, said he did not object to the hub as it would 'add to the facilities in Serangoon Gardens'.
However, the 69-year-old, who met SLA about two months ago to discuss plans for the site, said some tenants were a no-go. 'We would definitely object to tenants such as bars or karaoke lounges,' he said, adding that he will be meeting SLA again to find out more about the tenants who will be moving in.
limjess@sph.com.sg
ongyiern@sph.com.sg
The new lifestyle centre being built next to the workers' dormitory at Serangoon Gardens will feature art workshops and sports facilities, but not retail or food and beverage outlets. -- ST PHOTO: DESMOND FOO
Lifestyle hub a buffer for Serangoon Gardens residents
Sited next to workers' dorm, it aims to offer family-centric activities
By Jessica Lim & Cheryl Ong
COMING up next to the controversial foreign workers' dormitory in Serangoon Gardens: a lifestyle centre with art workshops, drama studios and sports facilities.
The $1 million refurbishment of the Lifestyle Hub @ Burghley includes building a carpark, renovating existing buildings and constructing sheltered walkways. It is likely to be ready next month.
The centre's operator, Hean Nerng Facilities Management, was awarded the tender by the Singapore Land Authority (SLA) in June.
The subsidiary of LHN Group, which manages more than 10 properties including residential and commercial properties, said there are 15 units available for rent. A list of prospective tenants is awaiting SLA's approval, but so far none of them had been given units.
The 6,880 sq m site - slightly larger than a football field - is about 15m away from the dormitory and is separated from it by a fence about 2m high.The site, a sub-plot of the old Serangoon Garden Technical School, currently has three single-storey blocks with a gross floor area of about 1,900 sq m. The rest of the former school compound now houses the controversial foreign workers' dormitory.
Residents in the area were upset when the Government proposed building the dormitory there two years ago. More than 1,400 residents petitioned against it, citing concerns that it would increase crime rates and lower their property values.
To address the problem, the quarters took in 600 workers to prevent the area from becoming overcrowded. An access road was also built so the workers would not have to go through the estate to get to the dormitory.
The lifestyle centre was, in fact, 'deliberately carved out to form a buffer between the dorm and the residential areas in Serangoon Gardens', said Member of Parliament for the area Lim Hwee Hua, who had previously met residents to allay their fears.
The member of the Aljunied GRC team pointed out that there is no direct access between the centre and the dorm. Describing the new hub as 'largely family-centric', she said pains were taken to ensure that businesses in the centre would be compatible with the surrounding residential area. 'We were concerned about potential traffic issues if too many people were to descend onto this area, or if there were noise and other disruption to the residents,' she said.
The site is approved for art schools and studios, and for sports facilities such as tennis and squash courts. It is not approved for retail or food and beverage outlets.
However, this might be exactly the problem for the new sub-tenants there, said property developers.
Research director Colin Tan of Chesterton Suntec International said it might be tough for tenants to succeed unless they can attract those who live beyond the estate.
'The catchment is quite restricted to people who drive or those who live nearby,' he said. 'Tenants have to be quite well known to draw people from outside the estate.' The short lease, he added, made it a challenge for them to establish themselves in the area.
Hean Herng's initial lease agreement is for two years, but can be renewed until 2014. The company was the only bidder. It offered to pay $21,008 a month, more than $6,000 above the estimate given by the SLA.
Residents have been enthusiastic about the centre.
Retired teacher Rajakrishnan, 71, who lives a minute's walk away from the centre, said: 'We have a lot of retired folk in this area so it'll be good if we don't have to travel too far to participate in activities. It's just a hop, skip and jump away from my home.'
Asked about the dormitory, she said: 'The situation is not bad at all. The fence around it has helped to keep the workers from coming into our estate. None of my neighbours has grouses against the foreign workers. The hub will be in between us and the dorm - it helps things.'
Others such as retiree John Leow, who chaired a residents' committee on the dormitory issue, said he did not object to the hub as it would 'add to the facilities in Serangoon Gardens'.
However, the 69-year-old, who met SLA about two months ago to discuss plans for the site, said some tenants were a no-go. 'We would definitely object to tenants such as bars or karaoke lounges,' he said, adding that he will be meeting SLA again to find out more about the tenants who will be moving in.
limjess@sph.com.sg
ongyiern@sph.com.sg
The new lifestyle centre being built next to the workers' dormitory at Serangoon Gardens will feature art workshops and sports facilities, but not retail or food and beverage outlets. -- ST PHOTO: DESMOND FOO
ST : Banks feel chill of new property rules
Sep 29, 2010
Banks feel chill of new property rules
Some report dip in home loan applications
By Esther Teo
SOME banks are starting to feel the chill of property cooling measures, a month after tougher home ownership rules were unveiled to rein in speculators.
They have reported a dip in home loan applications, in tandem with weakened buying sentiment as the measures kick in.
Most banks said, however, that there has also been an increase in the number of enquiries on the new measures, as buyers consider their financing options.
A DBS Bank spokesman said yesterday that it has seen a rise in enquiries from customers over the new measures on their loan applications.
United Overseas Bank's (UOB), head of loans division Chia Siew Cheng said that the property market has slowed down, with potential homebuyers staying on the sidelines to assess the impact of the new measures.
It seems that most property developers, however, are still proceeding with their latest project launches, she said.
It was a different story at Maybank Singapore, though. Its head of consumer banking Helen Neo said there has been no significant impact in terms of loan applications.
The turnaround time for processing loans, though, has been affected, owing to the additional checks required as a result of the new guidelines, she added.
Ms Neo said that while no customers had cancelled their loan applications as yet, many were taking a wait-and-see stance, even as the bank received a higher number of enquiries from prospective homebuyers.
The new rules, announced on Aug 30, state that buyers with one or more outstanding housing loans will now have to stump up a downpayment of at least 30 per cent of the property's price, up from 20 per cent previously.
At least 10 per cent must be in cash - up from 5 per cent before - but the remainder can come from their Central Provident Fund (CPF) accounts.
This means that buyers will now be able to borrow up to only 70 per cent of the property's purchase price, instead of 80 per cent previously.
A report by Moody's Investors Service earlier this month said that Singapore banks will benefit over the medium term, as their exposure to heavily indebted customers and future property price shocks will be reduced. This will enable their earnings to stabilise due to a decline in potential loan losses.
'In the short term, however, these benefits will be less obvious because credit costs on housing loans usually remain low until property prices start falling. Furthermore, a decrease in loan demand could negatively impact banks' interest income,' the report said.
A healthy property sector is critical for the three local banks - DBS, UOB and OCBC Bank - Moody's said.
All have 'significant exposures to the property market' - 52 per cent to 54 per cent of total loans as of June 30 - through their housing loans and lending to the construction and real estate sectors, of which a majority of borrowers are Singaporean.
On the ground, the picture is not clear yet. All eyes were on Hoi Hup Sunway Development's preview launch of its 473-unit Vacanza@East - a freehold project in Lengkong Tujoh near the Pan-Island Expressway in the east - yesterday. It is the third project to be launched after the measures were introduced.
In the first phase of the preview, 141 units were launched, the majority of which were two-bedroom and three-bedroom apartments. Hoi Hup Sunway, however, declined to reveal sales figures.
When The Straits Times visited its showflat yesterday afternoon, however, more than 100 people were milling around to view the property.
One potential buyer, who wanted to be known only as Ms Poh, said she was eyeing a 1,012 sq ft three-bedroom apartment listed at $1.14 million - or $1,126 per sq ft.
She decided against the purchase eventually, as she had an existing mortgage and would be able to take out only a 70 per cent loan with the tighter financing rules. 'With the new measures, it's now out of (my) price range,' she said.
esthert@sph.com.sg
--------------------------------------------------------------------------------
A report by Moody's Investors Service earlier this month said that Singapore banks will benefit over the medium term, as their exposure to heavily indebted customers and future property price shocks will be reduced. This will enable their earnings to stabilise due to a decline in potential loan losses.
Banks feel chill of new property rules
Some report dip in home loan applications
By Esther Teo
SOME banks are starting to feel the chill of property cooling measures, a month after tougher home ownership rules were unveiled to rein in speculators.
They have reported a dip in home loan applications, in tandem with weakened buying sentiment as the measures kick in.
Most banks said, however, that there has also been an increase in the number of enquiries on the new measures, as buyers consider their financing options.
A DBS Bank spokesman said yesterday that it has seen a rise in enquiries from customers over the new measures on their loan applications.
United Overseas Bank's (UOB), head of loans division Chia Siew Cheng said that the property market has slowed down, with potential homebuyers staying on the sidelines to assess the impact of the new measures.
It seems that most property developers, however, are still proceeding with their latest project launches, she said.
It was a different story at Maybank Singapore, though. Its head of consumer banking Helen Neo said there has been no significant impact in terms of loan applications.
The turnaround time for processing loans, though, has been affected, owing to the additional checks required as a result of the new guidelines, she added.
Ms Neo said that while no customers had cancelled their loan applications as yet, many were taking a wait-and-see stance, even as the bank received a higher number of enquiries from prospective homebuyers.
The new rules, announced on Aug 30, state that buyers with one or more outstanding housing loans will now have to stump up a downpayment of at least 30 per cent of the property's price, up from 20 per cent previously.
At least 10 per cent must be in cash - up from 5 per cent before - but the remainder can come from their Central Provident Fund (CPF) accounts.
This means that buyers will now be able to borrow up to only 70 per cent of the property's purchase price, instead of 80 per cent previously.
A report by Moody's Investors Service earlier this month said that Singapore banks will benefit over the medium term, as their exposure to heavily indebted customers and future property price shocks will be reduced. This will enable their earnings to stabilise due to a decline in potential loan losses.
'In the short term, however, these benefits will be less obvious because credit costs on housing loans usually remain low until property prices start falling. Furthermore, a decrease in loan demand could negatively impact banks' interest income,' the report said.
A healthy property sector is critical for the three local banks - DBS, UOB and OCBC Bank - Moody's said.
All have 'significant exposures to the property market' - 52 per cent to 54 per cent of total loans as of June 30 - through their housing loans and lending to the construction and real estate sectors, of which a majority of borrowers are Singaporean.
On the ground, the picture is not clear yet. All eyes were on Hoi Hup Sunway Development's preview launch of its 473-unit Vacanza@East - a freehold project in Lengkong Tujoh near the Pan-Island Expressway in the east - yesterday. It is the third project to be launched after the measures were introduced.
In the first phase of the preview, 141 units were launched, the majority of which were two-bedroom and three-bedroom apartments. Hoi Hup Sunway, however, declined to reveal sales figures.
When The Straits Times visited its showflat yesterday afternoon, however, more than 100 people were milling around to view the property.
One potential buyer, who wanted to be known only as Ms Poh, said she was eyeing a 1,012 sq ft three-bedroom apartment listed at $1.14 million - or $1,126 per sq ft.
She decided against the purchase eventually, as she had an existing mortgage and would be able to take out only a 70 per cent loan with the tighter financing rules. 'With the new measures, it's now out of (my) price range,' she said.
esthert@sph.com.sg
--------------------------------------------------------------------------------
A report by Moody's Investors Service earlier this month said that Singapore banks will benefit over the medium term, as their exposure to heavily indebted customers and future property price shocks will be reduced. This will enable their earnings to stabilise due to a decline in potential loan losses.
ST : The housing bubble trouble
Sep 29, 2010
THE ST INTERVIEW
The housing bubble trouble
In Singapore, Government's repeated intervention in the market is a good thing, says US expert
By Tan Hui Yee
IN MOST parts of the world, a government that intervened in the property market three times in one year would heighten uncertainty.
But not so in Singapore, observes Professor Joseph Gyourko, a housing economist from the University of Pennsylvania who was in town recently to speak at a forum conducted by the National University of Singapore's (NUS) Institute of Real Estate Studies.
He says: 'If the government gets into a habit of intervening all the time, it will harm market development. Investors won't want to invest because they can't be sure what the government is going to do Monday versus Friday.'
But the picture is clearly different in Singapore, he notes. The Government tried to temper speculation by abolishing developers' interest absorption schemes in September last year, and followed that with two additional rounds of measures in February and August this year that made it increasingly expensive for speculators to flip properties.
'You are sending a clear signal to investors that you are going to stop the price boom. The fact that you're doing the third round is a signal that you are going to do whatever it takes,' he says.
'And that actually may be providing clarity. You are telling everyone, 'Okay, we're just not stopping, we'll come up with something else down the road.''
This show of political will may just be what it takes to deflate Singapore's property bubble, he says.
Prof Gyourko, 54, knows bubbles intimately, having studied the sizzling property market in China and being privy to local developments as a board member of NUS' real-estate institute.
He believes home prices in Hong Kong, Singapore and China are being driven up by a mixture of real economic growth and short-term capital flows.
'Singapore's inflation rate is above the rate banks pay on deposits. When that happens, people want to put their money elsewhere. And one of the few alternative investments you can make is in housing.
'That's shifting a lot of money into homes. And that's not permanent or sustainable,' he says.
When the economy grows rapidly again, companies will ramp up production, the competition for capital will heat up, interest rates will rise - leaving over-leveraged property buyers in danger of defaulting on their loans. That could send property prices into a tailspin.
That said, he concedes that housing bubbles are by nature unpredictable, and the fact the Government here had to intervene three times indicates it had difficulty calibrating the measures required to tame the beast.
'Clearly, if the Singapore Government had known, it would have introduced Round Three right up front,' he says.
He rejects claims that rising property prices widen inequality, based on his experience in the United States market.
'The housing market is cyclical, so the claim is not true in the long run. In the US, when we had the boom...people were worried about wealth gains along coastal California and the East Coast of the US, which had the highest price rises. But prices cycle, and guess what? They fell - by a lot. What generates long-run inequality are skill differences, not home ownership,' says Prof Gyourko.
He predicts property prices in Hong Kong, China and Singapore will take a hit in the next one to three years, effectively cancelling out the gains owner-occupiers have made in the recent run-up.
'I don't worry about the fact that people got a bunch of capital gains because I think they are going to lose those capital gains,' he says, pointing out that these are paper gains.
But although property gains and losses even out over a lifetime, the resulting short-term frustrations may be hard to handle. 'It's easy for an academic to go, 'Don't worry, this stuff cycles.' If you are a politician, you've got to worry about that person being angry now because he has the vote, and you've got an election coming up.'
He acknowledges that while land in Singapore is scarce and property prices can be chased up without adequate control, the Government here has tried its best to make housing affordable through its public housing programme.
'You guys do public housing about as good as it's done anywhere in the world,' he says. 'For such a small place, it's well-planned. It's affordable to people with modest incomes,' says Prof Gyourko.
But one suggestion he has is that Singapore could be more flexible about the housing grants or similar subsidies it gives households, to give them more freedom over what homes they can buy and where they can live.
Currently, subsidised households can use their housing grant of $30,000 to $40,000 to buy only HDB resale flats. With a voucher system, they would not be limited to government housing.
He also questions Singapore's system of allowing Central Provident Fund savings to be used to pay for homes. This encourages people to base a huge chunk of their retirement savings on the fortunes of the property market in a tiny country. In investment speak, this is considered 'undiversified'.
'That's a really risky thing to do. What happens if there is a housing market collapse?' he asks.
The Singapore property market has had its hairy moments: Housing prices plunged after the 1997 Asian financial crisis, although they have since bounced back and even surpassed 1996 levels.
Singaporeans, he says, have to understand that the CPF housing scheme amounts to an 'implicit subsidy' as it lowers the interest payable on bank loans by reducing a home buyer's loan amount.
'I view housing as a consumption good. I view it literally as 'I'm eating my house.'' That means retirement savings should be kept separate from housing expenditure, he says.
In his view, owner-occupied homes especially are not investments that can yield returns, so people should not devote their retirement savings to their homes in the hope of growing their money.
Asked about the attributes of an ideal housing system, he offers a verbal sketch of its key planks: It should be equitable, responsive and flexible.
This means society would have to determine some minimum quality of housing that everyone should be entitled to. Households that cannot afford to pay for this minimum standard would get subsidies. Poor households with children would get more subsidies because 'kids do not get to pick their parents, and thus, are not responsible in any way for their poverty'.
Ideally, housing supply should be plentiful, in the sense that the rules should allow developers to easily ramp up home building to meet increased demand.
This moderates housing prices, he says, as it will allow prices to be close to or at the level required to cover land costs, construction costs and a builder's usual profit.
Finally, an ideal system would offer different kinds of housing - including rental housing - to meet the needs of the population over its life cycle. It is also one where the population is 'educated on the true benefits and costs of the different types of housing'.
He accuses governments worldwide of a bias 'towards encouraging owning' homes instead of being upfront on the opportunity cost of doing that.
As a result, most people underestimate the costs of owning a property, he says. They forget the transaction costs of buying and selling a home are 'quite high', and it does not occur to them to set aside money for long-term maintenance.
Buyers also risk getting stuck with their homes if a sharp drop in prices pulls the value of their homes below the mortgage amount.
Unless a home owner in such a predicament has enough cash to make up the shortfall, he cannot move house. Some academics have fingered such 'underwater' mortgages as a possible explanation for stubbornly high unemployment figures in the US, as it means people living in declining cities cannot move to places where jobs are more plentiful.
In Singapore, which takes just about an hour to cross by car, the problems posed by such immobility are less serious. Still, he thinks being stuck in such 'underwater' homes could result in longer commutes to workplaces and stop families from moving close to the school they want their children to attend.
Prof Gyourko - a home owner himself in Philadelphia - is careful to declare he has nothing against home ownership, especially as it makes someone a stakeholder in his community. In the case of Singapore, it makes one a stakeholder in the nation.
But the goal of the Government should be to get people to 'make the right choice about owning versus renting, not that owning always is better'.
In sum, housing choices should follow people's needs over their lifetime, instead of determining how they have to live their lives.
Young people, he says, make 'natural renters' instead of home buyers because this arrangement allows them to respond quickly to changing circumstances.
'You can move to opportunity. You can get married. You can do all types of different things instead of being stuck in a house,' he says.
tanhy@sph.com.sg
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An authority on real estate and housing policy
'I bet that housing does not drive child-bearing decisions'
· What do you make of Singapore's quotas for different ethnic groups in public housing estates to discourage racial enclaves from forming?
I've never been a fan of quotas. My preference is to always incentivise people positively.
I would prefer paying a positive price for you to live in someone else's neighbourhood if you were of a different ethnicity. I'd bribe you to go into an area where you are not the majority. You get a bounty.
It provides more freedom of mobility and choice. But governments don't like my way because it is costly.
· Young couples in Singapore have complained that they are not able to start families because they have been priced out of the housing market. Your view?
I understand the claim, but I don't put much credibility in it. Governments like yours are famous for trying to encourage child-bearing through financial inducements. It doesn't work very well, does it?
It's because this decision is incredibly complex, incredibly long-term. My gut feel is the claim is made by people who just want a subsidy, and it's not affecting child-bearing decisions at all.
If it were a simple matter of finance, Singapore would not have a fertility problem. And there'd be no one with kids in Bangladesh.
· How has your view of housing as a consumption good shaped your own consumption of housing?
I certainly did not buy a bigger house than I needed because I knew the costs were very high. I tried to figure out with my wife how many kids we were going to have, and how much space we needed. We thought we wanted to have two kids; we bought our house when our first was coming.
But our family decisions drove our housing decisions, not the other way around.
Having said that, there's no doubt that incomes can affect fertility. For instance, in the Great Depression, fertility dropped worldwide. If you don't think you can support a family, you won't start a family.
Back then, it was about unemployment of 25 per cent and the danger of starving. Here, you are talking about an extra bedroom. There's a big difference.
· Still, wouldn't the lack of an extra bedroom make you delay child-bearing?
I think so. Living with mum and dad could delay it because of the lack of space. But the right way to do deal with this is to develop a rental market.
· So isn't housing cost an opportunity cost vis-a-vis having a family?
Without a doubt. Kids are expensive that way. The correlation could be worth looking at across countries. And you will have to take into account a lot of stuff.
Just think about Catholic countries where you have a religious group saying 'no' to birth control. You're going to see high fertility rates, no matter how low the income and what type of housing there is.
That's what makes it so hard to tell. But I still bet that housing does not drive child-bearing decisions.
THE ST INTERVIEW
The housing bubble trouble
In Singapore, Government's repeated intervention in the market is a good thing, says US expert
By Tan Hui Yee
IN MOST parts of the world, a government that intervened in the property market three times in one year would heighten uncertainty.
But not so in Singapore, observes Professor Joseph Gyourko, a housing economist from the University of Pennsylvania who was in town recently to speak at a forum conducted by the National University of Singapore's (NUS) Institute of Real Estate Studies.
He says: 'If the government gets into a habit of intervening all the time, it will harm market development. Investors won't want to invest because they can't be sure what the government is going to do Monday versus Friday.'
But the picture is clearly different in Singapore, he notes. The Government tried to temper speculation by abolishing developers' interest absorption schemes in September last year, and followed that with two additional rounds of measures in February and August this year that made it increasingly expensive for speculators to flip properties.
'You are sending a clear signal to investors that you are going to stop the price boom. The fact that you're doing the third round is a signal that you are going to do whatever it takes,' he says.
'And that actually may be providing clarity. You are telling everyone, 'Okay, we're just not stopping, we'll come up with something else down the road.''
This show of political will may just be what it takes to deflate Singapore's property bubble, he says.
Prof Gyourko, 54, knows bubbles intimately, having studied the sizzling property market in China and being privy to local developments as a board member of NUS' real-estate institute.
He believes home prices in Hong Kong, Singapore and China are being driven up by a mixture of real economic growth and short-term capital flows.
'Singapore's inflation rate is above the rate banks pay on deposits. When that happens, people want to put their money elsewhere. And one of the few alternative investments you can make is in housing.
'That's shifting a lot of money into homes. And that's not permanent or sustainable,' he says.
When the economy grows rapidly again, companies will ramp up production, the competition for capital will heat up, interest rates will rise - leaving over-leveraged property buyers in danger of defaulting on their loans. That could send property prices into a tailspin.
That said, he concedes that housing bubbles are by nature unpredictable, and the fact the Government here had to intervene three times indicates it had difficulty calibrating the measures required to tame the beast.
'Clearly, if the Singapore Government had known, it would have introduced Round Three right up front,' he says.
He rejects claims that rising property prices widen inequality, based on his experience in the United States market.
'The housing market is cyclical, so the claim is not true in the long run. In the US, when we had the boom...people were worried about wealth gains along coastal California and the East Coast of the US, which had the highest price rises. But prices cycle, and guess what? They fell - by a lot. What generates long-run inequality are skill differences, not home ownership,' says Prof Gyourko.
He predicts property prices in Hong Kong, China and Singapore will take a hit in the next one to three years, effectively cancelling out the gains owner-occupiers have made in the recent run-up.
'I don't worry about the fact that people got a bunch of capital gains because I think they are going to lose those capital gains,' he says, pointing out that these are paper gains.
But although property gains and losses even out over a lifetime, the resulting short-term frustrations may be hard to handle. 'It's easy for an academic to go, 'Don't worry, this stuff cycles.' If you are a politician, you've got to worry about that person being angry now because he has the vote, and you've got an election coming up.'
He acknowledges that while land in Singapore is scarce and property prices can be chased up without adequate control, the Government here has tried its best to make housing affordable through its public housing programme.
'You guys do public housing about as good as it's done anywhere in the world,' he says. 'For such a small place, it's well-planned. It's affordable to people with modest incomes,' says Prof Gyourko.
But one suggestion he has is that Singapore could be more flexible about the housing grants or similar subsidies it gives households, to give them more freedom over what homes they can buy and where they can live.
Currently, subsidised households can use their housing grant of $30,000 to $40,000 to buy only HDB resale flats. With a voucher system, they would not be limited to government housing.
He also questions Singapore's system of allowing Central Provident Fund savings to be used to pay for homes. This encourages people to base a huge chunk of their retirement savings on the fortunes of the property market in a tiny country. In investment speak, this is considered 'undiversified'.
'That's a really risky thing to do. What happens if there is a housing market collapse?' he asks.
The Singapore property market has had its hairy moments: Housing prices plunged after the 1997 Asian financial crisis, although they have since bounced back and even surpassed 1996 levels.
Singaporeans, he says, have to understand that the CPF housing scheme amounts to an 'implicit subsidy' as it lowers the interest payable on bank loans by reducing a home buyer's loan amount.
'I view housing as a consumption good. I view it literally as 'I'm eating my house.'' That means retirement savings should be kept separate from housing expenditure, he says.
In his view, owner-occupied homes especially are not investments that can yield returns, so people should not devote their retirement savings to their homes in the hope of growing their money.
Asked about the attributes of an ideal housing system, he offers a verbal sketch of its key planks: It should be equitable, responsive and flexible.
This means society would have to determine some minimum quality of housing that everyone should be entitled to. Households that cannot afford to pay for this minimum standard would get subsidies. Poor households with children would get more subsidies because 'kids do not get to pick their parents, and thus, are not responsible in any way for their poverty'.
Ideally, housing supply should be plentiful, in the sense that the rules should allow developers to easily ramp up home building to meet increased demand.
This moderates housing prices, he says, as it will allow prices to be close to or at the level required to cover land costs, construction costs and a builder's usual profit.
Finally, an ideal system would offer different kinds of housing - including rental housing - to meet the needs of the population over its life cycle. It is also one where the population is 'educated on the true benefits and costs of the different types of housing'.
He accuses governments worldwide of a bias 'towards encouraging owning' homes instead of being upfront on the opportunity cost of doing that.
As a result, most people underestimate the costs of owning a property, he says. They forget the transaction costs of buying and selling a home are 'quite high', and it does not occur to them to set aside money for long-term maintenance.
Buyers also risk getting stuck with their homes if a sharp drop in prices pulls the value of their homes below the mortgage amount.
Unless a home owner in such a predicament has enough cash to make up the shortfall, he cannot move house. Some academics have fingered such 'underwater' mortgages as a possible explanation for stubbornly high unemployment figures in the US, as it means people living in declining cities cannot move to places where jobs are more plentiful.
In Singapore, which takes just about an hour to cross by car, the problems posed by such immobility are less serious. Still, he thinks being stuck in such 'underwater' homes could result in longer commutes to workplaces and stop families from moving close to the school they want their children to attend.
Prof Gyourko - a home owner himself in Philadelphia - is careful to declare he has nothing against home ownership, especially as it makes someone a stakeholder in his community. In the case of Singapore, it makes one a stakeholder in the nation.
But the goal of the Government should be to get people to 'make the right choice about owning versus renting, not that owning always is better'.
In sum, housing choices should follow people's needs over their lifetime, instead of determining how they have to live their lives.
Young people, he says, make 'natural renters' instead of home buyers because this arrangement allows them to respond quickly to changing circumstances.
'You can move to opportunity. You can get married. You can do all types of different things instead of being stuck in a house,' he says.
tanhy@sph.com.sg
--------------------------------------------------------------------------------
An authority on real estate and housing policy
'I bet that housing does not drive child-bearing decisions'
· What do you make of Singapore's quotas for different ethnic groups in public housing estates to discourage racial enclaves from forming?
I've never been a fan of quotas. My preference is to always incentivise people positively.
I would prefer paying a positive price for you to live in someone else's neighbourhood if you were of a different ethnicity. I'd bribe you to go into an area where you are not the majority. You get a bounty.
It provides more freedom of mobility and choice. But governments don't like my way because it is costly.
· Young couples in Singapore have complained that they are not able to start families because they have been priced out of the housing market. Your view?
I understand the claim, but I don't put much credibility in it. Governments like yours are famous for trying to encourage child-bearing through financial inducements. It doesn't work very well, does it?
It's because this decision is incredibly complex, incredibly long-term. My gut feel is the claim is made by people who just want a subsidy, and it's not affecting child-bearing decisions at all.
If it were a simple matter of finance, Singapore would not have a fertility problem. And there'd be no one with kids in Bangladesh.
· How has your view of housing as a consumption good shaped your own consumption of housing?
I certainly did not buy a bigger house than I needed because I knew the costs were very high. I tried to figure out with my wife how many kids we were going to have, and how much space we needed. We thought we wanted to have two kids; we bought our house when our first was coming.
But our family decisions drove our housing decisions, not the other way around.
Having said that, there's no doubt that incomes can affect fertility. For instance, in the Great Depression, fertility dropped worldwide. If you don't think you can support a family, you won't start a family.
Back then, it was about unemployment of 25 per cent and the danger of starving. Here, you are talking about an extra bedroom. There's a big difference.
· Still, wouldn't the lack of an extra bedroom make you delay child-bearing?
I think so. Living with mum and dad could delay it because of the lack of space. But the right way to do deal with this is to develop a rental market.
· So isn't housing cost an opportunity cost vis-a-vis having a family?
Without a doubt. Kids are expensive that way. The correlation could be worth looking at across countries. And you will have to take into account a lot of stuff.
Just think about Catholic countries where you have a religious group saying 'no' to birth control. You're going to see high fertility rates, no matter how low the income and what type of housing there is.
That's what makes it so hard to tell. But I still bet that housing does not drive child-bearing decisions.
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