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It is a well-known fact that the property market moves in cycles. Whenever there is a boom, a slump will inevitably appear, followed by (hopefully) a recovery.

What is harder to recognise is where we are currently in the market. Hindsight is 20/20. Frequently however, many so-called "experts" would be better off simply tossing a coin when it comes to predicting the market. Upcoming executive condo include  Treasure Crest Northwave EC  The Visionaire EC, Wandervale EC, Parc Life EC while existing ones include Waterwoods EC, Signature at Yishun, Skypark Residences, The Vales EC, The Criterion EC, Bellewaters EC, Bellewoods EC.

Since we are no experts, we will not be predicting what is going to happen to the market, and whether we have already hit our lowest point, or are still awaiting a bigger crash. What we will do instead is to recap what has happened over the past years, and explain why we think the Government is right in not prematurely removing the property cooling measures. You can decide for yourself if you agree with us.

The Boom Years

If you bought a property during the tail end of 2008 to early 2009, congratulations, you hit the jackpot!

Based on SRX Singapore Property Index, property prices in Singapore were at its lowest during this period. If you recall, that was the time where the full effect of the global financial crisis was felt throughout the world, including Singapore.

The boom subsequently came. And it came remarkably fast.

Between January 2009 to February 2013, the property market climbed a remarkable 86.5 per cent. If you annualised it over the 4-year period, we are looking at a growth rate of about 21.5 per cent a year, or 1.8 per cent per month. That is a better return than some of the scams that we know of promise!

There are many factors that led to the increase in property prices. Low interest rates, capital inflow from overseas, Singapore's strong recovery, the influx of foreign talent and some others. We won't go into details for all this.

One of the things that we will talk about is the recurring theme in all property booms - people's sentiment. In almost every property boom, the initial increase in property price, which could be a legitimate increase due to recovery in the economy, will subsequently be pushed forward further by retail investors who are hoping to ride on the waves of the property boom. When more people are interested to invest, prices increase. This becomes a self-fulfilling prophecy.

Property seminars teaching people how to invest will appear. The weekend newspapers would be filled with advertisements marketing on the latest property development and why you should be buying it. This fuels people's interest, leading to showrooms that are packed to the brim.

The Slump Years

One of the key drivers of property prices is the naïve thinking that for some reason, this boom is different, that it would somehow never end. On hindsight, a 21.5 per cent annual increase in price would never be sustainable, whether there's government cooling measures or not. So why are people blaming the measures?

There had been lots of complaints lately about how the government is killing the property market with their refusal to remove the cooling measures that were previously introduced. Are these complaints warranted? Or are they merely the result of property developers trying to lobby for the measures to be taken away so that their unsold units can be moved?

Statistically speaking, the property index has fallen by about 6 per cent (based on SRX Property figures) since February 2013. This decline appears moderate, especially when compared to the crazy increase seen in earlier years.

Would a removal of the cooling measures help reverse this decline and reignite the market? Possibly.

Will prices increase? Probably.

Who would gain from that? Property developers and homeowners who have overleverage themselves. No Removal Of Property Cooling Measures

Despite extensive lobbying from the industry, the government announced last week during the budget that it is premature to removal the cooling measures. And after doing some research of our own, we have to agree with their statement.

In spite of the fact that the property market is subdued, property developers are not exactly rushing out to offer great discounts to clear their existing stock. Rather, they are playing a wait and see game, holding on to their unsold units in the hopes that a market turnaround would occur.

Let's take for example D'Leedon, a high-end development along Farrer Road. An average selling price of the units in D'Leedon is currently about $1,600 - $1,700 psf. When you do a quick URA historical comparison of the current price against the selling price back in 2013 (when prices were supposedly at it's peak) you will be surprised to find out that the current price is not any cheaper than what it used to be. Perhaps it is even more expensive. As of this month, the developers of D'Leedon still have about 190 unsold units.

D'Leedon is definitely not the only development in Singapore that is holding firm on its price. Many other developments are likewise playing a similar strategy. Only time will tell if this strategy works out.

There is no question that volume has thinned drastically. A large part for this would be the Additional Buyer Stamp Duty (ABSD) tax. Due to the tax, even prudent cash rich Singaporeans who want to pick up additional private property would shy away from the current market. These potential buyers are still paying relatively high prices for units, in addition to the tax that they have to pay to the government. When you add the two up, this doesn't work out to be a good deal.

In our opinion, the removal of cooling measures would no doubt introduce a large pool of buyers back into the property market and allow developers to clear their existing stock at their current asking price. In time to come, prices will increase.

The big question is, should prices be increasing? Have prices fallen by such a drastic level that a recovery is now required for the market?

The Government does not believe so. And we think they are right.

Who said property cooling measures may never be lifted?

July 4, 2016

I read with bewilderment the article from Singapore Property Review titled “An inconvenient truth: Property curbs may never be lifted, analysts warn”.

“The report argued that unless property prices plunge suddenly and dramatically, buying curbs may not be lifted in order to substantially reduce Singapore’s unhealthy fixation with real estate.”

This remark from the Maybank Kim Eng property report leaves me scratching my head. While I try to digest what it really means, I notice that there are some important points that the analyst may have missed in the arguments.

There are at least four things that I hold a different view from what the brokerage firm says.

1. No one can influence the Singapore government’s housing decisions.

The efforts of industry stakeholders and market analysts to predict or speculate whether and when the government will lift the property cooling measures have proved in vain time and again. And now, someone is trying to make a wild guess that “what if buying curbs become permanent”.

Frankly, I don’t think the report has “posed a previously unthinkable question”. It sounds more like making an unfounded hypothesis on the market situation.

The ministers and relevant authorities have repeated at least nine times from February 2014 to April 2016 that they won’t be relaxing the property buying restrictions, unless prices have corrected to a meaningful level. It never says anything like property curbs are here to stay, permanently.

Isn’t the government clear enough on its policies regarding cooling measures? Why some people still don’t get it?

It is not “Property curbs may never be lifted”. It is “Whether property curbs will be lifted may never be influenced by any party”.

Please stop second-guessing what the government is planning. When in doubt, ask the government.

2. It’s dangerous betting on cooling measures to attract property buyers.

A developer told the media that the government will be smart to know that it’s time we lifted property curbs in Singapore. In other words, get ready to buy soon.

The media said that Additional Buyer Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) are very likely to be relaxed after the government loosened car financing. So it’s time to buy again.

Now the property agent may probably say that they know the government will never change the buyer and seller stamp duties. We can’t avoid paying 7 to 15 percent more ABSD whether we choose to buy it now or later. So no need to wait. Just get used to it. Take it as a fact of life and buy now.

We helpless buyers in the market are bombarded with messages from the media advising us to load it, cock it, aim and shoot. Then get ready to load, aim and shoot again.

Do they know that most of us have limited bullets? What if the market doesn’t recover after we have shot all our bullets? Is the advice from the industry players bullet-proof? Who are going to save us if we get shot?

In less than a week after the British voted for Brexit, UOB suspended overseas loans for London properties. A year ago we were invited to a high-class restaurant for an UOB overseas property investment seminar where a UK conveyancing lawyer talked about the attractiveness of investing in London properties. At the end of the talk, we were given high quality umbrellas as souvenirs.

Banks lend us the most when we need them the least. The reverse is also true. Remember what the main character said in Hanzawa Naoki (半沢直樹), a 2013 Japanese television drama?

“Banks will lend you umbrellas on a sunny day, but they will take them back when it is pouring.”

It is not uncommon for banks to tighten financing and ask borrowers to repay housing debts when they perceive a forthcoming crisis. Lesson learned: Make sure you have a Plan B before you fire.

3. Property investment is not economically non-productive. Property speculation is.

I disagree with the following argument in the report:

“Singapore households have SGD840b of capital or 209% of GDP tied up in residential property. This has resulted in lower disposable income which has impeded consumer spending and muzzled entrepreneurship. Another less obvious implication of property ‘overinvestment’ is that home-price appreciation fuels wage inflation, reducing Singapore’s cost competitiveness.”

It is true that Singapore has an unusually high home ownership rate of 90.8 percent among residents. Thanks to the Housing Development Board which provides affordable public housing for over 80 percent of Singapore’s resident population.

If most households are paying their housing loans with their CPF money for their highly-subsidized flats (rather than using hard cash to pay market rate for rent or mortgage), it is wrong and unfair to say that this “has impeded consumer spending” and “fuels wage inflation”.

The report also blames Singapore households for sitting on a cash pile of S$374b which the analyst assumes is set aside for to buy investment properties when prices are right, thus making the idle capital “economically non-productive”.

S$374b is a huge sum of savings. But that doesn’t mean all will be spent on buying properties.

Asians, especially Chinese, are well known for their virtue of saving rather than spending. What’s wrong with saving money for a rainy day?

“Singaporeans need to be weaned from their age-old aspirations of being landlords earning passive rental income. Investors also need to shed their deeply entrenched belief that investment properties are the best asset class to hold.”

There is nothing wrong with buying the right property at the right time and at the right price, either for passive income or for long-term appreciation. The only problem is buying any property in any market at any price, hoping that prices will go up in the near future. The latter is called property speculation rather than property investment. Only too much speculation in properties is “economically non-productive”.

All investments carry risk. But that doesn’t mean that we should avoid it altogether. We don’t have to give up on love just because there is a chance of heartbreak or divorce. Instead we should learn as soon as possible and as much as possible how to avoid failures. And we spend a lifetime continue to practice what we learn in order to be successful.

4. Entrepreneurship is not less risky than property investment.

The Maybank Kim Eng report advises the government not to remove the cooling measures for the sake of Singapore’s long-term survival.

“If part of the monies that has been locked away in anticipation of a bottoming of the property cycle flows towards productive assets or even consumption, we believe entrepreneurship can be enhanced and thrive.”

Is Singapore’s traditional culture or our education system encouraging entrepreneurship? Are Singapore’s cost of living, banking practices, foreign labor policy, etc. favorable for SMEs? What will happen if one day we tell our parents or our partners that we are going to give up our stable job and our HDB flat to be an entrepreneur?

Last month Switzerland had a vote on an unconditional basic monthly income of 2,500 Swiss francs (S$3,460) for every adult, so that everybody can now pursue what they really want to do in life rather than being confined by the salary of a stable job.

The success of Singapore’s economy is based on the provision of a skilled workforce to attract foreign investment from over 3,000 multinational corporations. Can you imagine Singaporeans quitting their jobs in droves to follow the ‘Swiss dream’?

Who just said property cooling measures may never be lifted?