Impact of Latest Round of Cooling Measures on Property Market

Mr Liang Eng Hwa asked the Minister for National Development whether the various measures to cool the property market have achieved their intended results and whether the state of the property market is on a development path that is sustainable, stable and healthy for all stakeholders.

The Minister for National Development (Mr Khaw Boon Wan): Sir, the sharp increase in housing prices in recent years was the result of an imbalance in supply and demand, against the backdrop of global liquidity with very low mortgage interest rates and strong economic growth in Singapore. We are therefore addressing this problem in several fronts.

We are ramping up the supply of both public and private housing units, in order to correct the imbalance. These efforts will need to be sustained for several years. Five rounds of cooling measures were aimed at eliminating speculative demand, encouraging financial prudence and moderating investment. Global liquidity, however, is something beyond our control.

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Nevertheless, the combination of these measures is producing results. For example, private home prices registered a marginal decline in the first quarter of this year for the first time. This had followed nine consecutive quarters of moderating price increases. As another indicator, the proportion of sub-sales in the market, which is a common proxy for the level of property speculation, has fallen sharply to about 4%. The Additional Buyer's Stamp Duty (ABSD) measure which we introduced last December has also helped to rein in investment demand. The proportion of private residential properties bought by foreigners and companies had fallen sharply to 7%.

In the public housing market, most first-timers now have a chance to select a BTO flat if they apply for one. HDB resale prices have also moderated, increasing by 0.6% in the first quarter of this year, and this is the smallest price growth in recent years.

All these are encouraging signs that the market is moving towards a more sustainable path. But we must not let our guard down. There are still concerns in our housing market. For example, although private housing prices have started to stabilise in the central region, they are still rising for mass market properties outside the central region. We are also seeing an increasing number of what has been called the shoe-box units being sold by developers in the suburbs, where their appeal to tenants remains untested. We will continue to monitor these developments closely and will not hesitate to take action, if necessary, to ensure that the housing market remains stable and sustainable.

Mr Liang Eng Hwa: Sir, I thank the Minister for the update. Notwithstanding what the Minister said about the data which point to some moderation, sentiments on the ground continue to suggest that the property market is still hot with new benchmark being set even for heartlands locations. Some Singaporeans are worried that they are behind the curve. The Minister mentioned about some supply coming on-stream to cool the market. I would like to ask how the Government intend to pace out this supply of land, that is the land sales, so that we will meet the immediate demand but we will not end up with a situation where three to five years down the road, we will have an oversupply situation and especially in a scenario where there could be an economic slowdown or severe slowdown.

Secondly, on the question of the interest rate, I was trying to get an answer from the Minister for Trade and Industry, but I could not get an answer from him. Maybe the Minister can also enlighten us how we intend to cool the property market, or manage this high demand, given this very low interest rate environment.

Mr Khaw Boon Wan: Indeed, the global liquidity and, therefore, the associated low interest rate environment is one contributing factor to the current property market, not just in Singapore, but all over the world. As I said in my reply, it is something beyond our control and what we can do is to work on those factors which are within our control, and those are also major factors.

The efforts of the last few years on these various fronts have, I believe, produced significant results, as shown by the data I have suggested in my reply. Clearly, the market is a lot cooler than it was, say just one year ago, although there are little pockets of "hot" activities, particularly in the mass market with the emergence of the shoebox units. I can elaborate more about these shoebox units later as there is a PQ on this. But the Member's concern about potential oversupply if we are not careful is something that, I think, we all ought to be mindful of because cycles sometimes get a little bit too exuberant. And when it crashes, it can also create other kinds of problems. That is why we continue to be very vigilant, closely monitoring the situation. Clearly I think the market is moving towards soft-landing but we have not landed yet, so stay seated with your buckle fastened.

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