Redas says there's no basis for new cooling measures

It calls moves 'tough', saying market started to pick up only last year

The property market was gloomy since 2013 and started to pick up after the economy expanded 3.5 per cent at the end of 2017. ST PHOTO: LIM YAOHUI

There is "no rationale" for the new private property cooling measures, the Real Estate Developers' Association of Singapore (Redas) said yesterday, leading a chorus of questions from analysts and research houses over the move.

In a statement, Redas labelled the steps to raise the Additional Buyer's Stamp Duty (ABSD) and tighten loan limits for individuals by 5 percentage points each as "tough". These kicked in yesterday.

It argued that the property market is "in the early stages of recovery, and that the recovery is in line with economic fundamentals".

In explaining the moves on Thursday, Minister for National Development Lawrence Wong said the Government was "very concerned that prices are running ahead of economic fundamentals".

But Redas said the market has been gloomy since 2013 and started to pick up only last year, after the economy expanded 3.5 per cent by the end of last year and 4.4 per cent in the first quarter of this year.

The organisation also noted that the transaction volume is within market expectation, adding that the old ABSD and total debt servicing ratios in place since 2013 continue to restrict buyers.

"Buyers are still price-sensitive," it said, adding that the property market "should be allowed time to find its own course and reach a sustained equilibrium".

Neither did it think there was any point inimposing "additional harsh measures" on developers.

Besides raising ABSD for entities by 10 percentage points to 25 per cent - a sum that can be waived if developers fulfil several conditions, including completing and selling all their units in a prescribed timeframe - the Government has imposed an extra 5 per cent ABSD that cannot be waived. This has raised the costs of purchasing land, such as at collective-sale sites.

Existing measures, such as financial considerations and "unfriendly business policies" such as the old ABSD and penalties, were sufficient, it said. "The new ABSD on developers will impose additional pressure on land acquisition as they compress their development, sales and land replenishment cycle time," it added.

Redas was not alone in criticising the timing of the measures.

Cushman & Wakefield senior director of research Christine Li said they were "the most draconian since the late 90s", with the costs of acquiring land in Singapore now among the highestin the world.

ZACD Group executive director Nicholas Mak said the authorities should have observed the take-up rate of new launches for at least another year, instead of "deflating the developers' car tyres just before a race". "The market has not run its course yet - you still have another 28,000 to 30,000 units coming on in the next few years, but they may have choked off demand. It ends up being a self-fulfilling prophecy of oversupply," he said.

Not everyone was put off by the new measures, however.

First-time home buyers such as market research assistant Ang Hui Xian, 29, said lower borrowing limits may force her and her fiance to adjust their budget for a resale condominium apartment in the east as they now have to fork out more cash for the down payment.

But putting the brakes on demand for these homes could work in her favour, as the couple might have an additional bargaining chip when negotiating the price.

"We might have to pay more cash upfront, but end up paying less overall," she said.

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A version of this article appeared in the print edition of The Straits Times on July 07, 2018, with the headline Redas says there's no basis for new cooling measures. Subscribe