Tackle property bubble with targeted measures

No one will dispute the need to maintain a stable and sustainable property market here.

But there is every reason to doubt the durability and dexterity of the Government's prescription for a challenge it has been grappling with for close to a decade with mixed results (Higher stamp duties, tighter loan limits for home purchases; July 6).

Its latest curbs may be best characterised as a heavy-handed, knee-jerk reaction to an unfolding frenzy that it has also inadvertently contributed to on the supply side, as opposed to a prescient pre-emptive strike on market froth for the long-term.

As recently as late last month, the Urban Redevelopment Authority put up several new sites for its land sales programme, citing very "strong demand" from developers, even though some analysts have estimated the number of unsold apartments here to be hovering at around 30,000, and rising. Yet, when the Government imposed its latest curbs, National Development Minister Lawrence Wong justified them by expressing concern at rising prices due to aggressive bidding and sales by developers, despite the wave of incoming supply and rising interest rates.

What clearly needs rationalising here is the Government's management of market distortions and expectations, with sweeping macro-solutions, when more targeted and specific measures would have been appropriate.

One major structural distortion that the Government has failed to address over the last decade is the growing prevalence of studio apartments targeting investors in the acquisition and development strategy of many developers. This money-spinner is the main cause of asset price inflation here in recent years, more so than cheap money circulating in the global financial system over the last decade.

Would these developers bid aggressively on properties comprising large units, as well as vacant sites, for development if there are clear rules and regulations on the percentage of studio apartments that may comprise their new projects, along with other high standards?

How can the Government nip market bubbles in the bud and smoothen out any unintended consequences of its measures if it has clearly misunderstood the root of the challenge?

Singapore can ill afford to erect buildings with many empty apartments for unproductive use or worse, dispense medicine for a fever that can cause a heavy cold, on a market of many home owners whose sole property is their main asset for financial security.

It is time for the authorities to show some prudent leadership on this matter.

Toh Cheng Seong

A version of this article appeared in the print edition of The Straits Times on July 11, 2018, with the headline 'Tackle property bubble with targeted measures'. Print Edition | Subscribe