Thursday, February 25, 2010

Don’t micro-manage property market

I REFER to Mr David Goh’s letter on Tuesday (‘They don’t go far enough in curbing excess’) about the new measures to curb property speculation. While the causes of the property price spike mentioned are valid, the proposed solutions may not be in Singapore’s best interests.

Raising the interbank interest rate too quickly could put the Singapore economy out of sync with the rest of the world. Our competitiveness may be hampered.

In addition, it must be noted that raising interbank interest rates has widespread ramifications. It should be undertaken only if it is deemed beneficial for the economy at large, and not just to curb speculation in a specific market.

There were also suggestions to ban collective sales of properties that are less than 30 years old, and requiring developers to redevelop en bloc properties within three years of acquisition. These measures would be detrimental to the free market principles that Singapore has thrived on.

I agree that the authorities should intervene in the property market as justified by the exuberance shown.

However, the two proposed solutions seem like an attempt to micro-manage the industry, which could hurt our free-market, business-friendly image.

Business activities, including property development, and prices should largely be established by free market participants.

The Government should not be deciding optimal property prices or which properties to acquire and when to develop them. Its role is to act in a counter-cyclical manner in terms of broad policy direction, so as to guide the market away from extreme booms and busts.

The latest steps by the Government seem moderate and considered. If the property market heats up further, an escalation of macro measures can be introduced subsequently. Drastic measures must be avoided as they can plunge the market into disarray.

Loke Hon Yiong

Source: Straits Times, 25 Feb 2010

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