Measures to cool property market appear to have worked: Mah

The government said on Monday the measures taken to cool the property market appear to have had the desired effect.

Speaking in Parliament, National Development Minister Mah Bow Tan noted that since the measures were introduced, the sale of private homes fell 37 per cent on-month in September, and another 29 per cent in October.

In September, the government removed the Interest Absorption Scheme and Interest-Only Loans to temper the exuberance in the property market and to prevent a bubble from forming.

The government has also announced it will resume land sales under the confirmed list of its land sales programme in the first half of 2010.

Mr Mah said the government will continue to monitor the property market closely to assess the market’s response to the measures introduced before deciding whether further measures are needed.

“Our key interest is to ensure that property prices and rentals remain competitive and move in line with economic fundamentals. We want to curb erratic spikes in prices due to excessive speculation, inaccurate information or market manipulation,” the national development minister said.

“But we must let market forces determine prices, based on genuine demand from home-buyers and investors.”

Mr Mah added that the measures introduced in September have also helped to control speculative activity. Government records so far indicate that the number of sub-sales today is not as high as it was during the height of the property market boom.

Sub-sales are closely watched as a gauge of speculative activity in the property market.

“The two schemes that we have removed or disallowed are rather targeted, targeted at the speculators, for example, who would make use of these schemes to flip or turn over properties quite rapidly. We have taken a calibrated approach to the property market. The idea … is to cool the market, not crash it,” Mr Mah said.

The minister said the government may remove the cooling measures in future if the property market stabilises or weakens, but it is too early to say when that might happen.

Analysts MediaCorp spoke to said they expect the property market to remain subdued in coming months.

Nicholas Mak, adjunct lecturer for Business & Environment at Ngee Ann Polytechnic, said: “(The cooling measures) have a psychological effect on speculators, removing many of them from the market. Another factor is that a large part of sale volume we experienced in the first half and later part of this year is mainly due to the sale of 99-year mass market condominiums. Developers are running down on inventory on such stock. As a result, home sales will start to slow down.”

In addition, fewer launches are expected in the year-end period.

Ang Choon Beng, director and head of research services at Cushman & Wakefield, said: “I think the November and December months will be quiet because it’s the holiday season. Most developers will only start launching new projects after the holiday season is over.

“The current situation is that developers are under no pressure to sell because they have substantially sold down their inventory. They have already sold down about 45% of total upcoming supply. So developers are not under any sort of pressure.”

But analysts do not expect prices to trend down yet.

“There’s excess liquidity in the market as a result of global low interest rates. Because Singapore is a transparent and open market, some of this money may come in. That may be an underlying factor that will support the property market in Singapore,” said Mr Ang.

Analysts expect prices to rise moderately, at about 5 to 10 per cent in the year ahead. The bulk of the increase is expected to take place in the mid to higher end of the market, as prices of mass market homes have already reached a high.

Source: Channel News Asia, 23 Nov 2009