Should cooling measures be eased, now that property prices are sliding further?
That question has cropped up again.
October data showed that private home prices fell 1.5 per cent in the third quarter from the second - the steepest such fall in seven years. That was also the 12th consecutive quarter of decline. In all, private home prices were 10.8 per cent lower, compared to the third quarter of 2013.
But Singapore's property prices remain high when compared to many major cities. The 2016 survey of housing affordability by Demographia puts affordability here at a median multiple price-to-income ratio of five, which is considered "seriously unaffordable". This means median housing prices are five times the median household annual income - which means it takes five years of wages to pay for a property. A multiple of three and under is considered affordable.
Those who think cooling measures should taper off would point to the long, steady slide in prices and add that a more buoyant property sector can lift a limping economy. Those who think otherwise will surely point to the fact that prices have just come off the edge of a cliff of 2009 to a gentle plateau and say there is scope for a soft landing down the road. Prices surged 62 per cent from the second quarter of 2009 to the third quarter of 2013; today's prices are just 10.8 per cent off that peak.
Analysts have variously predicted that the trough will be hit later this year, or later next year, and there will be a cutback in cooling measures, and prices may then rebound.
I think such views are unduly optimistic about the property market. They hark back to nostalgia for the heyday of the 1990s and early 2000s, when properties were unabashedly assets that people churned for massive gains free of tax, and the state actively promoted the doctrine of one's home as an asset to be upgraded, to enhance its value (remember the whole "asset enhancement" exercise?).
In the last decade, a distinct shift has occurred in Singapore that will affect the property market.
They will no longer be the sure-win investments of yore, but will become more like any other asset, with risk-return ratios to watch out for and uncertain prospects for capital gain. Yield in the form of rental income will remain low and will likely fall further as population growth slows in the face of popular pressure against rising numbers of foreign skilled labour.
More pertinently, a not so subtle social shift is taking place in Singapore's values that could change the property market.
(I should add here a big caveat that I am not a property analyst and I am not privy to regulatory insider insights. I merely offer these observations as a journalist with a keen interest in housing and property issues, who has lived in and owned both public and private housing units.)
First, there is a movement towards viewing property more as housing, as a social good, than as an investment item. This is consistent with the leftward drift in social policies in Singapore in the last decade.
In the latest example, National Development Minister Lawrence Wong said the Government is considering selling downtown flats on different terms, to make up for the "lottery" effect of some couples enjoying huge capital gains - of up to $500,000 - from selling their Housing Board flats in the city centre after fulfilling the five-year minimum occupation period (MOP). Some of these flats have been sold for more than $1 million.
He said the Government wanted a "fair and equitable" way to do so, such as by selling the flats under a shorter lease or increasing the resale levy or increasing the MOP.
In another interview, Mr Wong said cooling measures will be here to stay for a while to curb capital inflows, including from overseas, adding: "We don't want to be a nation of property speculators."
The pendulum has clearly swung the other way, with emphasis now placed on property as housing, with affordability and equity concerns, rather than as speculative assets.
Second, consistent with this shift, there is an increasing move to tax property gains. Just think of the slew of additional stamp duties slapped on foreigners, and on Singaporeans buying their second and third residential properties, and those selling their residential properties within four years.
While some analysts are hopeful that these stamp duties may be lifted, I do not think they will be - indeed, I do not think they should be, although the quantums can be adjusted.
They halt speculative demand.
They also introduce an element of equity into the property market, by raising the cost of acquisition for existing property owners to level the playing field - somewhat - for first-timers.
The idea that first-time home owners may deserve a break was not one I was sympathetic to in the past. Then one day, back in those years when you could own private property and buy HDB resale flats, a woman I interviewed told me she had considered buying an HDB resale flat for investment but could not bring herself to outbid the hopeful young couples she met during home visits, who were trying to buy their first home. She had the financial power, but she walked away.
I've forgotten her name, but what stayed with me was the compassion and sense of solidarity in her decision: One can give up a good investment option - every property player knows an HDB flat has the best rental yield - for the sake of a fellow citizen's home ownership dream.
Third, there is more stress on equity and redistribution these days.
It wasn't too long ago that government ministers urged people to buy new HDB flats to make capital gains from selling them after the requisite five years of living in them. Now, Mr Wong wants a fair and equitable way to offset large gains - a move towards better redistribution.
If the Government wanted to go the whole hog, of course the best way to redistribute gains from property investments is via a capital gains tax. The United States, the United Kingdom, Australia, South Korea, Thailand and many countries have capital gains tax.
Singapore does not - a fact highlighted by tax advisers. The nomadcapitalist website says: "Around the world, there are dozens of countries that impose no taxes on capital gains in one way or another. The list includes the usual suspects like Singapore..."
To be sure, any move to remove Singapore from the "list of usual suspects" will be a radical departure from Singapore's laissez-faire, capital gains tax-free status. Arguments against such a tax, advanced in Parliament and elsewhere, are that it can impede investments and erode Singapore's tax competitiveness, jeopardising both its status as a talent magnet and a financial hub.
But many cities with capital gains tax are financial hubs attractive to foreign talent, including New York and London. (Hong Kong and Switzerland, like Singapore, do not have capital gains tax.) A capital gains tax can also be structured to exempt home owners, or those who hold on to their properties for many years.
What Singapore does have are rules that tax income from trading in properties - so if you buy and sell properties for profit, the taxman may come probing. But this still means the billionaire who makes $10 million from selling a Good Class Bungalow after five years pays no capital gains tax.
Already, many analysts have pointed to the fiscal strain from a declining taxpayer base and rising social expenditure - resulting from an ageing population - and suggested that Singapore might have to consider a capital gains tax. I think a closer look at this option is warranted.
In the short to medium term, property will remain an attractive investment for Singaporeans flush with cash, who have few other investment options with good yields. But I don't think they should bank on double-digit annual growth in prices.
Property should be viewed as any other asset class, with attendant risks, especially when you consider that the entire social milieu of Singapore is shifting. Just how that will affect the regulatory environment - and policies on housing and on taxation - will be one of the chief risks in property investment in the future.