Make lowering property prices a goal

I can understand the primary motivation for the implementation of the cooling measures - to reduce systemic risk and the chance of a more severe correction later on (Sustainable property market benefits all, by the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore; July 17).

Still, I would urge policymakers to go a step further and make lowering property prices an objective in itself, as suggested by editor-at-large Han Fook Kwang (Govt can do more to increase housing choices; July 15).

Based on S&P Global Ratings figures, Singapore has the second-highest private property prices in Asia, behind only Hong Kong, which is facing a housing crisis.

While investors and developers may like stratospheric property prices, lower property prices would benefit most Singaporeans and society in general. Upgraders and first-timers benefit from lower prices and society benefits through more productive capital allocation, greater disposable income for other activities and not having ever-decreasing apartment sizes.

Some may make the argument that in a society with high levels of home ownership, property prices should be kept high to preserve value for existing owner-occupiers.

This is a fallacy. The fact is, if they plan on living in their property, high prices have no impact on their lives. If they choose to upgrade, lower prices will be beneficial to them.

Among owner-occupiers, lower property prices are potentially detrimental only for retirees and others looking to downgrade. Even then, most have already seen such great capital appreciation in their property that this would simply mean a lower but still sizeable profit.

Being able to downgrade at a high price also has a negative side as it typically means selling to another Singaporean, who then has to bear the cost burden, often causing an intergenerational transfer of wealth from the younger generation to the older generation.

As a society, it is important that we maintain social mobility, give the younger generation the opportunity to aspire to private property at a reasonable price, and avoid the creation of a quasi-landed gentry.

Beyond economics, in land-scarce Singapore, it is important that we continue to tailor our housing policies strictly towards an end objective of improving the lives of owner-occupiers.

Jeremy Teo Chin Ghee (Dr)

A version of this article appeared in the print edition of The Sunday Times on July 22, 2018, with the headline 'Make lowering property prices a goal'. Print Edition | Subscribe