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The following is a contribution from a reader:
“I read on Yahoo today about housing: “Singapore Q3 private home prices went up 0.5% quarter on quarter”. Frankly speaking, the headlines did not surprise me. Why? Many of my friends and relatives are crazy about condo shopping right now!
3 questions bother me:
Q1) Were the cooling measures introduced August 2010 and January 2011 effective?
Q2) What were the root causes for continual interest in Singaporean property?
Q3) What more can this Government do?
Q1) Were the cooling measures introduced on August 2010 and January 2011 effective?
A) Those measures were targeted at foreigners and non-individual buyers, and it had indeed proven to be effective. The proportion of private residential properties bought by foreigners and companies fell from 20% in 2011 to about 7 percent in 1H 2012.
Q2) What were the root causes for continual interest in Singaporean property?
A) An increase in liquidity can be observed, ever since the U.S. started their quantitative easing policies (i.e. printing more money). When you serve this in an ultra low interest rate environment, property as a hedge against inflation becomes appealing amidst stock market uncertainty. The question that looms over everyone’s mind is: “Where can i park my excess money, given that bank’s interest rate are so low and inflation is so high?”
Q3) What more can this Government do?
A) Before this question can be answered, we have to revisit Question 1 earlier. What if Government action was in the converse? What would be the scenario then if cooling measures (back in August 2010 and January 2011) were not executed? I am speculating, but I am pretty certain that increase could be much more than just 0.5%! Intervention made for a nice cushion that softened economic impact for all of us.
Now back to Question 3. What more can this Government do? Personally, I believe inflation-linked bonds could have been introduced to retail investors.Retail investors could then preserve their savings, which in turn reduces demand for property investment. Whilst this was a convenient suggestion, however, implementation might not have been as casual because the Ministry of Finance would have needed to find ways to fund these inflation linked bonds programs (p.s. nothing is free in this world).
I hope that our bureaucrats will continue to monitor the market closely, and remain ready to revise and enhance the policy (for both HDB and private properties), if and when the situation demands it.”
