Tuesday, November 17, 2015

Managing the property market

This article asks the question, "Will the average Signaporean get burnt if the ABSD is removed"?


He explained that the ABSD (Additional Buyer Stamp Duty) and the restriction on loans were introduced to reduce speculation in the property market. If the ABSD is reduced or removed, the impact on the property market is uncertain and different people would be affected differently..

His argument shows the difficulty of managing a complex market with buyers, sellers and speculators.

In the past, there was a solution to prevent this kind of erratic market. The government acted as a buffer. If there was an over supply, the government absorbed it and waited a few years for the market to reach its new equilibrium. If there was an increase in demand, the government increased the supply (and do not worry about facing a glut later on.

When a government takes on the task of managing the market cycle, it helped to create stability in the market. It worked in the best interest of all parties.

During the past three decades, the government reduced its role in the market. They decided that it is best for the market to take care of supply and demand. In some cases, the government acted as a participant in the market with the same mentality as the speculator!

It is time for the government to get back to play its fundamental role. It should act as a buffer to match changes in supply and demand.

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