Should stagnating house prices be a cause for cheer or worry?
Housing Board resale prices have been virtually flat for the past 11/2 years, and in the private property market, similarly tepid conditions have caused consternation among developers and property agents.
Yet in public housing, such price stagnation - or rather, stability - is arguably a desired outcome.
It certainly seems to be desired by the Government, which has worked to rein in runaway prices caused by earlier policies. More than a short-term reaction, this shift can be seen as philosophical: from the role of the house as an asset to its role as a home.
And as policies and market conditions change, it seems that new home buyers and existing home owners, too, are adopting this view.
CHASING ASSET APPRECIATION
The HDB resale market began its slow descent in 2013. After rising 1.8 per cent in the first half of 2013, the resale price index then fell 2.3 per cent in the second half.
It has then gradually coasted into stagnation. Since the last quarter of last year, prices have moved by no more than 0.1 per cent each quarter.
Two decades ago, this would have been unthinkable. In the 1990s, the Government's explicit aim was to boost the value of the home as an asset. In a 1992 speech, then Prime Minister Goh Chok Tong stressed the importance of supporting government upgrading to raise HDB flat prices.
"It is in your interest to ensure that the value of your flats continue to rise," he said. "Every 10 per cent increase in the value of your flat means a huge increase of several thousand dollars in your wealth."
Three years later, at the completion ceremony for upgrading in Kim Keat, he noted with pride that prices there had doubled in the last three years.
The 1990s, he noted, was "a new phase where the Government increases your asset value through the Assets Enhancement Programme".
A few days later, then Acting Minister for National Development Lim Hng Kiang had a similar focus on resale prices. Speaking about Toa Payoh, he said: "With the upgrading of the precincts, we are trying to achieve the objective where the end result... will be a new town that is even more attractive than Bishan and will command higher prices than Bishan."
For then Senior Minister Lee Kuan Yew, profiting from an HDB flat seemed the obvious choice for a young person. As he mused in 1994: "I would start off with a five-room or an HDB executive... Quickly, before my income ceiling takes me beyond that. You buy a flat in Bishan, it's going today for half a million. So I would get there first, stay five years, seven years, and then move out."
But as recessions hit at the turn of the century, concerns changed.
By the mid-2000s, citizens were worried not so much that house prices would stagnate, but that they were out of reach. Things came to a head in the 2011 General Election, with discontent over high house prices seen as a key factor in the ruling party's loss of votes.
A COOLER CLIMATE
The Government had been trying to tame housing markets for several years, with multiple rounds of cooling measures, but it was only after 2011 that the impact began to be felt. HDB resale prices rose a staggering 10.7 per cent in 2011. In contrast, 2013 saw a full-year fall of 0.6 per cent.
That year, then National Development Minister Khaw Boon Wan spoke of the need to "re-examine some old assumptions". Among the questions he asked: Should Housing Board flats continue to be an appreciating asset or return to being treated simply as a social need - as a home, first and foremost?
Mr Khaw already had a cooler market in mind: "Looking ahead, as we may no longer get the same kind of returns from reselling an HDB flat as in the past, how will its role as an asset be affected?"
Today's quiet resale conditions have not eliminated speculative incentives entirely. Premium units, such as those at the Pinnacle @ Duxton, still command record prices. For National Development Minister Lawrence Wong, this remains a concern for the future, given the development of new areas such as the Greater Southern Waterfront.
In October, he noted that offering more public housing in the city "under the same regime" is implausible. "There will be a bit of a lottery effect because whoever gets it... will have a huge appreciation potentially."
NO MORE WINDFALLS
The Government is thus looking at whether future public housing in the city can be sold under a different model. But can more be done to avoid the profit-chasing of the 1990s? Experts say that market conditions might do some of the work.
"Conditions can, and most often will, create or affect mindsets," said PropNex Realty chief executive officer Mohamed Ismail Gafoor.
Rather than seeing earlier generations as profit-chasing per se, the fervour of the 1990s might be better understood as the result of market incentives, he added.
A limited supply of new flats sent demand overflowing into the resale market, driving up prices. Coupled with strong economic growth and highly subsidised mortgage loans, resale flats became "a highly speculative commodity", he added.
The flip side is that in today's cooler market, mindsets should shift to look at HDB flats primarily as homes, not stores of value for future capital gains.
Some Singaporeans, of course, rejected the idea of profit-chasing in homes much earlier, as evidenced by the unhappiness in 2011.
In Our Singapore Conversation housing dialogues in 2013, many also agreed that the priority should be meeting housing needs, rather than ensuring that flats are appreciating assets.
Now, as the market remains sluggish, existing home owners too seem to be coming around to the idea that the glory days are over.
"As the days where quick and big gains can be made... are over, what we are seeing is that current flat owners are treating their property as more of a good place which they call their own, and are less stressing themselves unnecessarily about the price gains they can or would have achieved upon a resale," said R'ST Research director Ong Kah Seng.
As a housing reporter, I speak to HDB resale flat sellers whenever I cover the monthly resale statistics. Some are about to move into new flats and need to dispose of their old ones, and feel resigned to accepting whatever price they can get - a far cry from the triumphant unit-flipping upgraders of the 1990s.
A new generation of home owners, too, seems to be getting onto the housing ladder without necessarily hoping to climb many rungs.
In Build-To-Order launches I cover, many young applicants opt for non-mature estates such as Punggol and Sengkang, with affordability often cited as a deciding factor.
And as my peers - in their late 20s - begin settling down and searching for houses, the talk is seldom of distant condominium ambitions, but, instead, of finding an ideal and affordable place to call home.
All this is anecdotal, but nonetheless suggests that today's home buyers have more modest expectations of their housing journey, in line with the current market stability.
As Mr Ong puts it: "We cannot have both solid stability and price appreciation."
Buyers and home owners now appreciate the "fundamental offering" of HDB flats, adding that "it is a stable asset class".
He said: "People are eschewing getting potential big price gains from HDB flats - upon future resale - for the priceless stability that HDB flats offer."
CHANGED POLICIES CHANGE MINDS
The corollary is that mindsets could change again if the market does. Said Century21 chief executive officer Ku Swee Yong: "Several decades of talking about 'asset enhancement'... has only recently simmered down. Simmered down, but (it has) not died out."
What could keep ambitions in check, besides market conditions, are policies. Said Chris International director Chris Koh: "Perhaps what is driving sales numbers down is not just that citizens are no longer chasing after the profits, but rather the property climate and financing guidelines."
He and other experts point to how resale volume dipped in 2013 precisely after tighter loan rules kicked in.
Said Mr Koh: "This is evidence that it is not just the economic climate but the property measure (of loan curbs) that has taken a toll on the HDB resale market."
As long as these loan curbs remain - and there is no sign they will be lifted soon - they reinforce the idea of a home as a long-term commitment more than an asset to be flipped.
Preserving property values remains important. Yet thanks to subsidies, home owners who bought from the HDB will not be worse off unless the market crashes. New flats generally cost around a fifth to a third less than resale ones, though the prices are not formally linked.
Home owners can still sell their flats for a profit, thanks to this starting difference, noted Century21's Mr Ku.
In today's calmer resale environment, perhaps this more modest approach to potential housing gains is one worth having.