Tuesday, September 14, 2010

Need to stabilize property prices

A country can be prosperous when the property prices increase, reflecting confidence of the citizens and foreigners in the country. However, this situation can get out of hand, resulting in an asset bubble and property that became priced out of reach of the citizens. This harmful impact is recognized in China, and steps are being taken to address this problem.  Prime Minister Wen Jiabao said, "It is the key responsibility of all levels of governments to stabilize housing prices and to guarantee availability of housing”. He did not say that this matter is beyond the control of the government and can be left to the market forces.

A property bubble can also be caused by excessive speculation as the speculators made big profits at the expense of the desperate home owners.

Singapore's prosperity is also largely built on an asset bubble. We have to be prepared for the economic consequences when the bubble burst.

3 comments:

Steven said...

I am not sure whether it is asset bubbles or inflation or building cost or liquidity that is causing the prices to go up. We need to seperate HDB and Private Housing price when analysing it. Property is just like any assets example funds, shares, gold etc. HDB is unique in Singapore hence the prices are very sensitive topic. However, it is still a market driven if we talk about COV on resale. I have known of yound couple having total income of 14K complaining about HDB and Private housing prices, is it really unaffordable for them? I do not think so but everyone wants location, cheaper and good buy, dont we? Be realistic and financially responsible, if it is high look for alternatives like rental or smaller apartment instead. When there is no buyers, prices will come down but if you cannot wait, pay for the price that you see right for you.

Anonymous said...

Price that rises exceptionally high is not a good sign and may lead to asset bubble.

DareToAct said...

If we break down the cost of things we buy, we will find that a large proportion of the ingredient cost is due to rental cost and labour cost. Labour cost in turn is driven by cost of accommodation. Escalating land and property prices feed into the cost of everything. The feel good effect of owning HDBs or properties that appreciate in value will soon (don't think we have seen the full impact yet) be caught up by inflated prices of goods and services. We are like dogs running around chasing our tails.

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