EDITORIAL

Soft landing to safeguard interests of all

The minister in charge of housing moved boldly of late to manage expectations over where property prices are headed this year. National Development Minister Khaw Boon Wan said that if 2015 were to see a repeat of last year's gradual slide in HDB resale flat prices - estimated at 6 per cent - that would be "a very good development".

The sweet spot for housing prices defies universal satisfaction as one's perspective is a function of market status. Price levels are never low enough for buyers, while the sky's the limit for profit-hungry sellers and developers. In managing this dynamic, the proper role of the regulator is not to act as a referee but to ensure the market doesn't suffer from unsustainable gyrations, given the possible impact on the larger economy and the financial welfare of citizens.

Singapore is not alone in weighing macroprudential policy options necessitated by the property price surges of recent years. For example, cooling an "unbalanced housing market" is a key concern of Australia's banking regulator - as it should be, given the International Monetary Fund's assessment that it is the world's most overvalued housing market on a price-to-income basis, after Belgium. Also deploying tools like mortgage lending restrictions are Britain, New Zealand and Hong Kong.

What is commonly acknowledged is that housing has long served as a rampart of stability and financial safety, to the benefit of all stakeholders, including property players and banks. Thus, it would be hazardous if it becomes a source of significant risk instead, as might happen should prices balloon uncontrollably to bursting point. Conversely, cooling measures that precipitate a market crash can also lead to a devastating result, particularly when it affects older generations who have banked away wealth in their homes.

Mr Khaw is right in observing that a double-digit fall is one many would find hard to accept. The challenge is to strike a balance between ensuring private homes remain within reach of the young and upwardly mobile who reasonably aspire to own one as part of their Singaporean dream, and protecting the wealth of existing property owners.

Avoiding both over-heating and over-cooling calls for fine judgment. On the one hand, private property prices slid a mere 4 per cent last year compared to a jump of over 60 per cent in the past four years; on the other, one should be wary of interventions that precipitate an over-correction. All things considered, the approach of striving for a steady, gradual change in prices is likely to produce more equitable outcomes. Given uncertainties ahead such as interest rate hikes, the overriding concern is that private and HDB markets are kept on a stable footing.