They don’t go far enough in curbing excess

WHILE I welcome the government measures announced in last Saturday’s report, ‘New rules to curb property speculation’, I doubt if they are effective enough to cool the market.

The rise in private and public property prices in the past four years has far outpaced the average Singaporean’s pay hike.

I can think of half a dozen reasons for the sharp increase in private property prices:

• Low interest rates;
• The sharp rise in the non-resident population between 2006 and last year;
• A loss of faith in investing with banks, investment banks and fund managers following the collapse of Lehman Brothers;
• The low deposit and creative payment schemes crafted by developers;
• The storage of collective property sales which were not promptly developed but kept in developers’ land banks, resulting in short supply; and
• The herd mentality leading to the property chase.

To discourage speculation, the Government should raise the interbank interest rate to at least 2.5 per cent to help beat its projected inflation rate of 2 to 3 per cent this year.

Review capital gains tax on property bought and sold within three years – a measure used in the middle of the last decade.

Ban collective sales of condominiums or landed property which are less than 30 years old, unless there is a good reason to do so.

To avoid a land squeeze, developers must redevelop an en bloc property within three years of acquisition.

David Goh

Source: Straits Times, 23 Feb 2010