Published 29 April 2011
By Colin Tan
With the General Election (GE) just around the corner, several people have asked me whether I think the poll results would have an impact on the private housing market.
If you are asking whether investor confidence in private property here would be affected, the answer is a definite no. Whatever the outcome of the polls, be it by a clear margin or a narrow victory for the ruling party, I feel the liquidity factor is just too strong and I am convinced the buying, as well as prices, will not drop.
But if you are asking whether the level of risk would change following the elections, the answer is likely yes. The most obvious change would be in the level of policy risk. Depending on how the ruling party reads the results of the elections and what it interprets the electorate wants done, it may take an entirely different tack on how it has been handling the housing problem.
With the exception of the most recent set of cooling measures in January, quite a few property analysts believe the authorities have been tackling the housing market with kid gloves as they have one eye on the GE. This distraction will soon be gone.
Most of the measures have been very focused and targeted mainly at speculators. Of course, the authorities are assuming that this group of opportunists are the main culprits – get rid of them and the problem is solved – forgetting perhaps that investors can also behave irrationally.
Our Government has won many admirers both within and outside Singapore for its creativity in coming up with effective measures in tackling our problems. In my opinion, it just needs clear feedback on what voters want. I think its present measured approach is what it feels would produce the outcome that will make the overwhelming majority happy, or at least not make them unhappy. I think it will not alter its approach if it is not convinced otherwise.
The GE is one opportunity where citizens can give feedback to the ruling party on what it wants. And so, depending on the voting patterns, it may not necessarily mean more of the same measures such as lower loan limits. Let us brace ourselves come Polling Day.
For now, the liquidity beast tormenting our housing market would not just lie still and die. Instead, it has grown stronger.
Compared with what other regional countries, such as China, India or Australia, are doing to cool their property markets, we seem to be behind the curve.
As a laggard in this respect, we are probably viewed by most regional investors as having the most market upside. This is probably providing the strong underlying support for the robust developers’ sales we have experienced so far.
Lately, some market comments on this issue appear to suggest that we need not worry too much about the high volume of sales because this has now become the norm.
We are treading into dangerous territory if we buy this argument. How can the current level of sales coming after four sets of cooling measures culminating in one of the most stringent – a punitive sellers’ stamp duty – be considered normal? If we remove these cooling measures today, how high do you think the buying will soar to?
This reminds me of the fable about a frog being cooked by a slow flame in a beaker of water. Because the temperature of the water was raised gradually, the frog did not realise the danger it was in as it adjusted to each degree rise in temperature as the norm.
If you are still not convinced, let us take the low-interest rate environment. It has been with us for the longest time ever experienced by our housing market. Can we consider this the new norm?
Colin Tan is head, research and consultancy, at Chesterton Suntec International.