SINGAPORE - By increasing the supply of public housing and moderating demand with two rounds of cooling measures, Deputy Prime Minister Lawrence Wong is confident the property market will be stabilised.
Addressing a question on why housing prices are increasing here amid a time of slowing growth and rising mortgage rates, Mr Wong said the root of the problem is a supply issue. The Government will have to address it by increasing supply in the housing market, which is already happening, he added.
He noted that before the Covid-19 pandemic hit, the housing market – both public and private – was relatively stable, and resale prices on the public market had been decreasing for six consecutive years, from 2013 to 2019.
Mr Wong was speaking at a roundtable discussion on the Budget on Monday, organised by The Straits Times and The Business Times and sponsored by UOB.
The pandemic disrupted the completion of projects in both the public and private sectors, impacting supply.
Mr Wong, who is also Finance Minister, said: “In the past, when we had a crisis, supply gets impacted, demand also comes down. This time around, demand didn’t come down, demand stayed very strong.”
One of the reasons for the buoyed demand was that when supply was impacted, the queues for Build-To-Order flats became longer and Singaporeans got anxious, said Mr Wong.
He added: “The psychology is ‘If I have to wait six years instead of four years for my BTO flat, I better join the queue now. I better apply earlier’.
“So more came forward, and then those who couldn’t get their flats on time decided to go to the resale market, and that pushed up prices on the resale market.”
For the private property market, demand was affected by changing norms because people wanted more space in their flats, and more people, especially younger Singaporeans, wanted to live on their own, he said.
With the delays in project completion, there were also more Singaporeans looking to rent, pushing up rental demand, said Mr Wong.
On top of that, as Singapore had done well amid the pandemic, non-residents were coming to the Republic – whether returning or coming here for the first time – and also seeking rental flats.
“So you have a very, very exceptional and unusual circumstance where supply was impacted but demand remained strong, and that’s why you have the imbalance that we have today,” said Mr Wong.
He noted that there would be 40,000 new completions for both private and public housing in 2023, the highest in about five years.
From 2023 to 2025, there will be 100,000 new completions for both markets.
With considerable supply coming on-stream and the cooling measures moderating demand, Mr Wong said: “I’m confident we will be able to bring stability back to the market again.”
When asked by panel moderator and ST associate editor Vikram Khanna when this would happen, Mr Wong said no one can guess how asset markets operate.
He added: “We have been through these cycles before in the property market. It may take some time, because you’re not only pushing out supply, but you also have to manage demand, and it takes time for sentiments to change.
“But as you said just now, with rising interest rates, with a slower economy, I think people will also start to moderate their sentiments. And we already see some signs of that in the housing market now.”
Fellow panellist Alvin Liew, a senior economist at UOB, said that in time, Singapore will see the housing price increase slowing, but the concern is still that it will add to costs for businesses.
While it will not be a permanent issue, it can be quite an acute problem in the near term, he said.
In response, Mr Wong said the Government and relevant agencies are watching the rental market very carefully, looking at how they might be able to help.
In particular, for some of the more essential workers, the agencies are looking at how to help ramp up the supply of housing as soon as possible to mitigate some of the cost pressures that employers face, he added.