Tan Kin Lian's Blog: Buoyant property prices

Monday, December 20, 2010

Buoyant property prices

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

8 comments:

Vincent said...: When things are booming and rosy, claim the credit.

When things goes wrong, blame it to the external factors like world economy and you cannot control it. Or say you are caught off guard. Like that, our govt will forever never be wrong.

Only Singaporeans will buy that sort of story (That's why we are labelled as "daft").; December 20, 2010 9:50 AM
Unknown said...: Property price too high? Depend on whether you already owned one or not. There is alway a circle for everything for pricing to go up and down, just like Gold, petro, even handphone or cars. There is no goverment that would be able to have perfect policy to meet all requirements and needs. Learn to plan your financial and needs ahead especially for big ticket items like house. Cannot afford for a good location, good size then go for alternative like smaller one first and upgrade later. If not wait for price to drop. We should be more concern on Govt to manage health and education for the citizens instead. I believe with our reserve $$, more can be done on these 2 areas especially for low income and older generations that contributed so much to bring Singapore to where we are now. No generals can win in a war without good soldiers to fight for them.; December 20, 2010 11:22 AM
Unknown said...: Please allow me to clarify:

1) The headline is not mine and it distorts the content of my letter. Moreover, the letter had been heavily edited. My original headline was "Housing prices: Put things into perspective"

2) I do not own any properties because my personal view is that the property market is overextended and not sustainable.

3) The main point I'm trying to make here is that if the Government had not acted in the way it had during the financial crisis, and right now we have negative or slow growth with property prices languishing at its lows, would everyone be happier or better off in any way? Please help to point out which Government in the world had acted in a better way and which country is in a better position right now?

4) Even so I'm not saying the Government is perfect and there will definitely be be mistakes and always things that can be improved. What we need in Singapore and for Singaporeans to do is to engage in healthy constructive feedback. If you think you can do better than the Government, go ahead and speak up with an idea that trumps what the Government is doing and go do something concrete about it. Simply complaining is always easy but it is not going to help anyone much. It's always easy to find a scapegoat and it's never possible to satisfy everyone.

5) Buyers and sellers make up the market. If buyers don't agree to the high prices that sellers demand, no transactions will take place. Singaporeans, who make up the majority of the market (around 70%), had a large part to play in the run up of property prices and thus the blame should not be solely on the Government.; December 20, 2010 12:09 PM
symmetrix said...: This is my view. Prices of public property will not crash, regardless of what happenned in Japan, UK or the USA. It may correct itself downwards by maybe 10-20%, but not collapse. (The political system in .sg versus the other countries is so different.)

Politically it is in the govt's interest to control this, as 80% of the electorate stay in HDB. Trust the govt to pull out strong cards from their sleeves when things begin to go terribly wrong.; December 20, 2010 12:58 PM
Unknown said...: Benjamin C, ever wonder why your letter is heavily edited? Should you write in to clarify? Sometimes we try to look things at different angles and views. However, in reality, politician always has their own agenda and nevertheless will have great impact to all whether is good or bad. What we need is transparancy to counter complains with good and clear explanations and take responsibility when it needed. If someone or opposition party gave an alternative, there will still be people that think it is better or worse from their perspective. When come to policy, only the one in control (Govt) can do what they want and is not whether there is better alternative proposed. In the end, it is voting that carries the weight and all MPs elected should have same access rights to the public resources whether MP belong to the Governing party or opposition. When Singapore has arrive to this stage, then election is fair to all citizen because Govt should respect and support the elected MP to provide best service to their fellow citizens that elected them. Exampleike upgrading of facilities for the benefits to residents are also being related to politics then it is rather sad, not to mention on policies which has much greater impact for years to come.; December 20, 2010 1:58 PM
yujuan said...: Yes, trust the govt to slacken the building of public flats before the market boom when HDB was flushed with ready built flats around turn of the new century, so much so that when they open the floodgates to more immigrants, the market was overwhelmed with a shortage that demand shot up over limited supply. Could say HDB has no forsight ahead. Of course the blame is pinned on something else,the Authority is never wrong.; December 20, 2010 2:24 PM
michael13 said...: Besides the factors of supply and demand as well as economic prospects that determine the property prices in Singapore. There is another factor which allows our property prices to stay strong for the time being, it is called 'Singapore Premiums'. These premiums include our safe environment, good infrastructures, bond and trust level between the government and the people, sound education system and fair competition, etc.. With signs of complacency already set in our society, the mentioned-premiums are possibly being altered and reduced significantly in equal speed as fast as the rises of our property prices. The clash is not only possible but also Singapore can even become a 'Banana Republic' soon. Hope that I am one of an only few pessimists around and I am glad I will be proven dead wrong.; December 20, 2010 8:52 PM
michael13 said...: One of the possibilities for the crash of high property prices in Singapore can be resulted from a distorted fact and figure being presented to market players(the buyers and the sellers).

Benjamin C's letter to the Straits Times' forum page in which was heavily edited indicating a very discomfort sign of lacking the necessary trust and confidence on the part of authority-concerned in this regard.; December 22, 2010 7:44 PM