Minister Khaw Boon Wan is taking bold steps to increase the supply of HDB flats (for sale and rental). I believe that the measures have the endorsement of PM Lee. I support this strategy.
Many people have expressed the view that these measures will result in a correction of property prices and that existing property owners (especially those who have bought the properties at the high prices) will be unhappy.
I wish to give the following views on why a correction in property prices will be for the long term benefit of Singaporeans.
a) Existing property owners can upgrade their homes at a lower cost
b) First time buyers (especially the young) will pay lower prices for their HDB flats
c) The correction does not affect existing property owners who have bought a single property for long term occupation
d) The property prices will eventually increase due to inflation and demand, but at a moderate rate (excluding the speculative factor)
The only negative factor is that a property owner may be unable to meet the mortgage payment (e.g. on loss of employment), resulting in a force sale of the property. In that situation, the property owner can switch to a new mortgage where the bank takes higher priority over the CPF savings. This will allow the bank to allow a temporary suspension of the mortgage payments, instead of making a false sale.
I have seen the price of my property fell by more than 30% during economic recessions or financial crisis. It did not last long. After a few years, the property prices recovered.
I believe that a correction of the property prices will be in the interest of Singaporeans in the long run. I want to encourage property owners to look at the prospect in a positive way. I also want to advise young Singaporeans not to pay high prices for your HDB flats or private properties now, as the prices are likely to be lower in a few years time.
Tan Kin Lian
Many people have expressed the view that these measures will result in a correction of property prices and that existing property owners (especially those who have bought the properties at the high prices) will be unhappy.
I wish to give the following views on why a correction in property prices will be for the long term benefit of Singaporeans.
a) Existing property owners can upgrade their homes at a lower cost
b) First time buyers (especially the young) will pay lower prices for their HDB flats
c) The correction does not affect existing property owners who have bought a single property for long term occupation
d) The property prices will eventually increase due to inflation and demand, but at a moderate rate (excluding the speculative factor)
The only negative factor is that a property owner may be unable to meet the mortgage payment (e.g. on loss of employment), resulting in a force sale of the property. In that situation, the property owner can switch to a new mortgage where the bank takes higher priority over the CPF savings. This will allow the bank to allow a temporary suspension of the mortgage payments, instead of making a false sale.
I have seen the price of my property fell by more than 30% during economic recessions or financial crisis. It did not last long. After a few years, the property prices recovered.
I believe that a correction of the property prices will be in the interest of Singaporeans in the long run. I want to encourage property owners to look at the prospect in a positive way. I also want to advise young Singaporeans not to pay high prices for your HDB flats or private properties now, as the prices are likely to be lower in a few years time.
Tan Kin Lian
If overall property prices go down, the cost of living would go down.
ReplyDeleteFor majority of the people who owns one property, it would not affect them except a minority that bought them recently and those who need to sell them when the acquisition cost is high or they want to cash out and migrate.
Other than that, all would benefit including upgrader as in a lower price environment, sell low buy low.
Mr Tan,
ReplyDeleteI do agree that we need to engineer a soft landing. However Mr Khaw's action will come to naught unless the Finance Ministry moves in tandem.
All the "cooling" measures implemented thus far has failed. HDB resale prices remain high. News of more BTOs will not bring down the price of new flats, but will rush more people headlong into a 30-year debt abyss. As more BTOs are released, those waiting at the sidelines, see that prices are not falling, will begin to also feed into the buying frenzy. This will be the last phase of our property bubble.
Sibor has remained too low for too long. This has given the impression that good times will last forever. Look at Japan pre-1990 and HK pre-1987. They were rolling in good times one day and zilch the next.
Some people say "this time it's different". they say Singapore is so small, property prices will go on rising forever. Yes and no. In the long term, Singapore property prices will go on growing. But property price can only grow if people can afford. And right now, according to numbeo.com, we can ill afford these prices. It is not a question if correction happens, but when. Will it be a correction or a crash?
We need to hike interest and capital adequacy ratio of our banks. Some form of capital controls must be considered too. I only hope that we are not too late.
Honestly speaking, the Govt dunno want to do, they have painted themselves into a corner.
ReplyDeleteCooling measures for a softer landing must weigh against too strong a measure that would collapse the market with catastrophic backlash from citizens, esp those who bought at or near the peak.
The former Minister of National Development was completely caught offguard, reflexes too slow to nip problem in time.