Property curbs benefit nation's long-term interests

I applaud Minister for National Development Lawrence Wong for saying that property prices must not outpace economic fundamentals, otherwise "there would eventually be a destabilising correction that would be even more painful for everyone, both sellers and buyers" (July curbs to prevent property bubbles, says Lawrence Wong; Nov 16).

Developers have a vested interest to bid high at land tenders as this helps to push up the benchmark and valuation of the unsold units in their land bank in the same or nearby districts.

This principle is similar to the derivatives market - the future market prices carry a premium as an option for future potential but will eventually drive the prevailing physical market price upwards.

Consequently, the prevailing physical property price (completed units in this case) will rise and drive the future land sale price further.

However, unlike the derivatives market or stock market, in the Singapore property market, most people buy property as a home with a loan tenure of up to 25 to 30 years.

The future economic cycles will be more abrupt and shorter.

Technological disruptions, trade frictions, currency fluctuations, geopolitical developments, and rising interest rates are casting more uncertainty upon the prospects of long-term gainful employment.

It is, therefore, a good policy that the Government plays a moderating role to prevent the property market from overheating.

Sum Kam Weng

A version of this article appeared in the print edition of The Straits Times on November 20, 2018, with the headline 'Property curbs benefit nation's long-term interests'. Print Edition | Subscribe