The cooling measures that hit the market in July are aimed at preventing property bubbles and stabilising the market so prices move in line with income growth and economic fundamentals.
That was the message from National Development Minister Lawrence Wong when he addressed the Real Estate Developers' Association of Singapore (Redas) 59th anniversary dinner yesterday.
Mr Wong told the event at The Ritz-Carlton Millenia Singapore: "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.
"Our aim is not to bring prices down. Our aim is to steady the property cycle ... and have a sustained property market where prices move broadly in line with income growth or fundamentals."
If the Government had not moved in July, Mr Wong said, "there would have been significant momentum behind prices".
"We are already seeing significant headwinds in the external environment, with trade, the global economy slowing down, interest rates likely to go up, and within our domestic market, more supply is coming on stream," he added.
"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 till next year. And in two to three years' time, there would be another crash, and many more Singaporeans would be hurt."
"We were at very real risk of having price increases that would run ahead of economic fundamentals. The pace of price increase over that 12-month period (from mid-2017 to mid-2018) was already almost double that of income growth in 2017.
"If prices continued to grow at that pace and outpaced fundamentals, there would eventually be a destabilising correction that would be even more painful for everyone, both sellers and buyers."
That's why the measures were introduced, Mr Wong said, adding: "In the last property cycle, the Government acted after a very sharp rise in prices. We had to intervene eight times before stability was restored.
"Prices came down by 12 per cent over a four-year period. But within a year, prices shot back up 9 per cent and there was every indication that the price increase will continue because developers' bids in GLS (government land sales) indicated bullish expectations of a continued rapid increase."
Prices have not come down since the July measures but they are "flattish, or increasing at a very gradual rate", he noted. "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."
Mr Wong added a consolatory note for the industry: "I understand that ...you as developers have short-term commercial imperatives. But I hope you will appreciate and understand the basis for the Government's actions, and why we think this is the more responsible approach to take in the longer term."
Redas president Augustine Tan told the audience that sale volumes have been uncertain since the measures: "After each launch, the sales momentum continues to slow."
While 932 private homes were sold in September compared with 617 in August and 1,724 in July, Mr Tan said there is no sign on how demand will pan out in the next six to 12 months. He said data showing just 487 new private homes were sold in October "confirms that the July sales, which were driven by the front-loading of purchases to beat the cooling measures' deadline, are not an indication of true demand".