POSTED 17 Jul 2018 - 13:04

Is the latest round of property market cooling measures well-timed or a tad early?

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What effects, if any, will there be beyond the property sector?
Joan
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Responses

Lim Soon Hock
19 Jul 2018 - 12:27

Owning a decent house is a fundamental desire of all Singaporeans, and if the government's latest move is to preserve this, it is justified, so long as the assessment that the property market is getting out of control is correct. To prevent a potential bubble burst which will hurt many genuine homebuyers, the government's intervention is correct, or justified.

There is another macro consideration in relation to this move: Cost of living is high in Singapore, including that of owning a car (and for good social reasons). And to the extent that this can be contained, if not reduced, the new round of property curbs is a prudent move, from the larger scheme of things.

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Maren Schweizer
19 Jul 2018 - 12:27

The cooling measure are nothing but a surprise to me. They come at the right time with a good set of levers to avoid a sharp correction as much as possible.

Conditional influencing factors due to oversupply, high price increases, high leverage and rising interest rates - and their likelihood and severity - had to trigger this red flag.

It shows again one of Singapore's advantages of fast decision making and is similar to predictive maintenance (PdM) in manufacturing.

This spells dark clouds for property-related lending financial sector while mortgage consultants have sunny days ahead.

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Luca Dotti
19 Jul 2018 - 12:26

Since the introduction of the first cooling measures several years ago, Singapore's property market has been influenced and driven by artificial cycles. When it heats up, the government introduces more measures, and when the measures are eased, the market recovers. The latest cooling measures are in line with the recent land grab from developers.

This will help to cool the buying frenzy. However, given the holding power of local landlords that stop transacting in periods of adverse market conditions, I don't expect the market to move out of the cycle created by government interventions.

Ultimately, the dynamics of a mature real estate market might drive investors to nearby countries and cities where returns remain attractive and have a higher yield potential.

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Robin C Lee
19 Jul 2018 - 12:26

The disapproving responses from the property industry are not surprising, as their business will be impacted one way or another by the latest property cooling measures. Might these measures be a tad too early or harsh? Perhaps.

But one also needs to assess this from a social angle. It is quite unnerving to see the recent surge in property prices wiping out years of government efforts to keep housing prices in check. Prices have soared nearly 10 per cent in the past few quarters and show no sign of abatement. If action is not taken soon, bubbles may form as supply surges while many properties remain vacant.

This can also hit younger local families, as the price gap widens between public and private properties. In my opinion, the taming of runaway home prices before they get out of hand is necessary to achieve a sustainable and healthy property market for all.

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Victor Mills
19 Jul 2018 - 12:25

The latest property market cooling measures were both necessary and well timed. Necessary, because sensible prudence was being ejected in favour of yet another bout of irrational exuberance. Well timed, because no one expected the intervention. The recent return of sky-high, en bloc fever was a concern. Whatever the en bloc deal, sellers can very rarely afford to buy a similar-sized unit in the same area.

Property prices, especially residential property prices, must bear some relation to economic fundamentals. Buyers of second, third or fourth residential properties always need to guard against being over-leveraged in a period of rising interest rates. This is another reason why the government acted.

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Tan Chong Huat
19 Jul 2018 - 12:25

An impressive S$9 billion closed in 2017 and over S$10 billion in the first half of 2018 took Singapore's en bloc sale market by storm, fuelling runaway property prices. The Residential Price Index is at its highest and developers have seized the opportunity to launch residential properties at never-before-seen prices.

En bloc transactions have peaked, so calling the latest round of curbs a cooling measure may be a misnomer. The joint forces of top authorities will freeze the residential market, just like in 2013.

Last-minute rushed sales, developers' discounts to soften the impact, property stocks hit hard aside, we will see a correction in property prices.

The latest measures may have come too late for our good, but too sudden and harsh for some.

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Ian Lee
19 Jul 2018 - 12:25

The latest property cooling measures seem to be pre-emptive but also well thought through. While the current global economic activity is robust, growth is weakening. Trade war is now a high-risk factor as tariffs start impacting real output. Singapore, with its tight integration to global trade, will definitely be affected. This, coupled with rising interest rates, could have an adverse impact on property prices and so the measures seem to be an effort to pre-empt a future ''hard landing''.

Beyond the property market, the cooling measures will have an effect on the banking sector and overall investment sentiments as well. Furthermore, we now expect the recovery in the labour market situation in the construction sector to take longer.

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Pauline Goh
19 Jul 2018 - 12:22

While the latest round of property curbs caught many market players by surprise, they are aimed at tempering the exuberance of the market from both the demand and supply sides of the equation. Primarily, the revision of the Additional Buyer's Stamp Duty (ABSD) and loan-to-value (LTV) limits serve to encourage prudence on the part of buyers.

The additional tariffs imposed on the supply side will curb the exuberance in land prices which could have driven up property prices in the long term. Heftier acquisition costs will dampen developers' land acquisition appetites and require them to relook their strategies. This is especially so for high-unit-yielding sites where developers face the time pressure of selling all units within a five-year period. Apart from the Government Land Sales programme, the private-sector-led collective sales market will be impacted.

First-time buyers are unaffected by higher ABSD but have to contend with the higher LTV limit of 75 per cent as this will mean a greater initial cash outlay for their property purchases. In a rising interest rate environment, this will discourage potential buyers from over-leveraging and safeguard their financial health. The priority of the Singapore government is to ensure a sustainable property market; the latest measures could just be the bitter pill that needs to be swallowed.

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