Fewer applicants for new flats and five consecutive quarters of resale price falls have seen the Housing Board market going off the boil. The operative word is "going", denoting an incomplete market correction. National Development Minister Khaw Boon Wan's view that control measures for the sector as a whole should remain is the clearest word yet that real estate retains a capacity to cause an unwelcome wobble in the economy. Relative to the cumulative price run-up in the boom years, the considered judgment is that such cooling as has occurred has some way to go.
A planned 25 per cent reduction in the supply of build-to-order HDB flats next year, on top of a smaller trim this year, is a measured response in the sense that most people who currently need a flat have got one, although prices are only slowly coming off their peak. Young married couples and families wanting to live close together will continue to enjoy preference. This is pitching close to the golden mean.
But mindful of the last bout of frothiness, when cash over valuation became a burden to buyers, one could not be certain that the supply contraction will produce the desired price stability within a reasonable period. (In new and resale private housing, industry expectations of 10-15 per cent falls to more sensible price levels have not eventuated.)
Things are never that simple in real estate, especially in public housing planning. The HDB works to a gestation of four to five years, beginning with the number crunching of existing stock, marriage rates, foreigners granted residency and, yes, even emigration outflow to an extent. Anything could happen in the interim to necessitate a review.
Preserving a balance between holding fair value for existing owners and keeping prices reasonable enough for intending buyers and upgraders is part logic, part intuition. Singapore has seen extremes, sometimes unavoidably.
In the booming 1990s, HDB applicants had to contend with long queues despite strong supply. Finicky buyers undecided about location and flat-type waited for up to seven years. The Asian currency crisis that struck shortly after caused the market to seize up, leaving what became a dead stock of 30,000 flats. It took years to clear the surplus.
Disruptions can occur at any time. Unease about the current global growth slowdown is a reminder that asset volatility can be managed up to a point only. Imponderables include terrorist strikes and spikes in interest rates.
The HDB maintains a small buffer stock to act as a stabiliser, but even this is subject to variables. Hence, it would be a tall order to expect planners to always strike a perfect balance between supply and demand, and between affordability and eroding asset values.