Benjamin Ching wrote in the Straits Times Forum that the buoyant property prices is a sign of rising wealth and it could be attributed to the measures taken by our government to achieve the economic recovery. This statement must please our government leaders greatly.
This was the same argument given to the booming property prices in Japan in the late 1980s. Although the property prices went to astronomical levels, the optimists justified them by pointing out the exceptional performance of the Japanese economy, especially in exports. I could not remember if anyone said at that time that it reflected "a sign of rising wealth". The bubble burst in 1990 and the property prices have remained in the doldrums for two decades.
A similar situation could be found in America during the greater part of this decade. The rising home prices were justified by the reasoning that the American economy had inspired confidence of investors around the world. Well, the bubble had finally burst and even the most optimistic observers now do not expect any recovery for a few years. It could take longer.
The rising property prices in Singapore is more likely caused by the extremely low interest rates, the large influx of foreign workers and the inability of the government to anticipate the shortage of housing. It is aggravated by the inflow of speculative foreign funds (and the lack of control of the inflow).
As with other countries, I expect the pain to come when the property prices correct in Singapore. I do not buy the argument that the government could cushion the fall as Singapore is a small place and can be managed. When things get out of control, it cannot be easily managed.
Tan Kin Lian
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12/19 - 12/26
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