The Minister for National Development in speaking at the Real Estate Developers’ Association of Singapore (REDAS) 59th Anniversary Dinner said that the Government will intervene in the property cycle in order to yield more benefits for the majority of Singaporeans in the long term.
“Let me be very clear. The Government cannot, and will not take a hands-off attitude to the property cycle. So, there should not be any surprise when we intervene in the market, because that is our approach and attitude. I do not think any responsible government should do so. Instead, we will do whatever we can to prevent property bubbles from forming, and to minimise exuberance in the market.” – Minister for National Development Lawrence Wong
Mr Wong said that in the last property cycle, the Government acted after a very sharp rise in prices, and that it had to intervene eight times before stability was restored. He added that the Government learnt from that experience and decided to move quickly to implement the latest round of cooling measures in July this year.
Giving the data and facts for the intervention by the Government in the property cycle, the Minister said:
“Within a period of 12 months from mid-2017 to mid-2018, prices had increased by more than nine per cent. To put this in context, in the last cycle, it took the Government eight rounds of cooling measures over a period of four years – and over this period of four years, prices came down by about 12 per cent. But within one year, prices had shot back up by nine per cent. And there was every indication that the price increase would continue, because the developers’ bids for Government Land Sales (GLS) sites indicated quite bullish expectations of a continued rapid increase in property prices.
“We were at a very real risk of having price increases that would run ahead of economic fundamentals. The pace of price increase over that twelve-month period was already almost double that of household income growth in 2017. If prices had continued to grow at that pace and outpaced fundamentals, there would eventually be a destabilising correction later on that would be even more painful for everyone – both sellers and buyers.”
He explained that these where the reasons why the measures were put in place and that they were intended to moderate the property cycle.
“Four months on since July, we have seen the results – prices have not come down. They are flattish, or perhaps increasing at a very gradual rate. Land sales and overall transaction volumes have moderated. Importantly, the measures have encouraged en-bloc sellers and developers to be more realistic in their price expectations, which was what the Government had intended. The collective sales fervour had cooled noticeably, because the measures were intended to achieve that.”
He said that the objective of the Government’s intervention was not to bring prices down, but to steady the property cycle and to stabilise the market – to have a steady and sustained property market, where prices move broadly in line with income growth, or fundamentals. Mr Wong suggested that if not for Government intervention, the natural tendency of market dynamics may be such that prices would go beyond nine per cent, to possibly double-digits by the end of 2018.
“If we had not done anything, it is very likely that this year, prices would have exceeded a 10 per cent increase, maybe even gone up to 15 per cent, and this would continue next year. In such a scenario, in two to three years’ time, there would be another crash. Many more Singaporeans would be hurt. That is the reason why we had to move with the cooling measures.”
In explaining the Government’s thinking and the rationale for the property cooling measures, he said that he hoped to make the developers understand the framework in which the Government thinks about the property cycle, so that they can then plan ahead in their own business planning and decisions.
In saying why he differed from views that his Ministry should not intervene in property cycles, Mr Wong added that he is of the view that intervention is necessary to achieve a stable property market; one where prices continue to rise steadily in line with fundamentals.
“We believe that this approach is one that will yield more benefits for the majority of Singaporeans in the long term. Those who own homes for the long term – either for living in them, or investment – will benefit ultimately,” said the Minister.
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