IMPACT OF RECENT PROPERTY MEASURES

IMPACT OF RECENT PROPERTY MEASURES: 8.

Er Lee Bee Wah asked the Minister for National Development in view of the recent changes in HDB policy and ownership of overseas properties (a) what is the rationale of this policy; (b) whether HDB will allow exemptions to those who inherited foreign properties out of bequests; and (c) how will HDB trace whether a HDB owner has a foreign property.

9.

Mdm Ho Geok Choo asked the Minister for National Development (a) how many transactions of private properties by Permanent Residents (PRs) and foreigners were recorded in the last 24 months as compared to Singaporeans and, of these, how many were for (i) landed properties and (ii) condominiums; (b) whether there are any figures to indicate the regularity of the flipping of such properties by PRs and foreigners; and (c) what has been the rate of increase in the number of flipped properties.

10.

Mdm Cynthia Phua asked the Minister for National Development following the introduction of measures to cool the property market (a) what is the likely market reaction to these measures in the next five years; (b) what is the likely impact on the property market within a 10-year time frame; (c) what is the Government's assessment of the current market direction; and (d) whether there has been any new influx of foreign funds into the property market.

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The Minister for National Development (Mr Mah Bow Tan): Sir, may I take Question Nos. 8, 9 and 10 together?

Mr Speaker: Yes.

Mr Mah Bow Tan: Sir, the Government introduced the recent set of property measures to pre-empt a speculative bubble from forming, to encourage greater financial prudence and to reinforce the objective of long-term owner occupation for public housing.

Er Lee Bee Wah has asked about the policy rationale to disallow ownership of overseas properties for HDB flat buyers. Under current HDB policy, subsidised flat buyers are not allowed to concurrently own a HDB flat and private property, local or overseas, within the Minimum Occupation Period (MOP). This ensures that those who can afford private property anywhere do not compete for limited public housing subsidies. With effect from 30th August this year, HDB also subjects buyers of non-subsidised flats to the same rule. This aligns the treatment for all buyers of HDB flats within their MOP. It also dampens demand from those who are not in urgent need of housing.

Owners of private property can buy a non-subsidised HDB flat if they dispose of their private properties within six months of flat purchase. Specific to Er Lee's question, HDB is unable to allow exemptions for those who inherited these overseas properties as a general policy. However, I will ask HDB to look into the circumstances of special cases, on appeal.

At the point of purchase, HDB flat buyers are required to declare any interest or ownership in private property, local or overseas. False declarations carry serious consequences. Anyone found guilty shall be liable to a fine of up to $5,000 or imprisonment for a term of up to six months or both. If the false declaration is

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discovered before the completion of the purchase, HDB can cancel the application. HDB will conduct spot-checks, both local and overseas. If the false declaration is discovered after purchase of the flat, HDB can compulsorily acquire the flat. For practical reasons, HDB adopts different approaches to check on private property ownership in different countries. I am unable to disclose the details to avoid hampering HDB's enforcement work.

Mdm Cynthia Phua wants to know the market reaction to the measures. As they have been introduced less than two months ago, it is too early to assess their full impact. So far, there are signs of greater stability in the market. Based on URA's flash estimate of the Property Price Index (PPI), the increase in prices of private residential properties moderated to 3.1% in the third quarter from 5.3% in the previous quarter. The take-up of private residential properties has decreased in September this year as compared to August, and the recent level of sub-sales has also been relatively low. In the public housing market, the number of resale flat transactions in September has decreased by 25% compared to August. Mdm Phua has also asked what the property market will be like in five to 10 years' time. Sir, I wish I knew what the market will be like next year, let alone in five or 10 years' time. While we cannot foresee the future, we can monitor the market closely and we can act fast to pre-empt problems along the way.

Next, Mdm Ho has asked about property purchases by foreigners. Local buyers make up the vast majority of purchasers of private housing in Singapore. In the second quarter, Permanent Residents (PRs) and foreigners accounted for 13% and 12% respectively of all private residential transactions. These figures are close to the average of 12% for PRs and 10% for foreigners over the past two years.

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The proportion of landed residential properties purchased by PRs and foreigners has also been relatively low, accounting for less than 6% of all landed housing transactions in the past two years. The majority of sub-sales of uncompleted private residential properties are also accounted for by Singaporeans, rather than by PRs and foreigners, who together accounted for about 27% of all sub-sales over the last two years.

Sir, in conclusion, the latest property measures will promote a more stable and sustainable market over the longer term. This will benefit all parties. By dampening demand from those who are not in urgent need of housing as well as increasing our total housing supply, we will also help more first-timers to buy their first homes. We will continue to monitor the market closely to ensure that our policies stay relevant.

Er Lee Bee Wah: Mr Speaker, I would like to ask the Minister, since the introduction of the new HDB policy, how many cases of appeals has the HDB received and how many of these appeals are successful.

Mr Mah Bow Tan: I do not have the exact number of appeals but in terms of appeals from PRs – I presume the Member is asking about PRs – we have so far received a few hundred appeals, which is not large in comparison to the total number of transactions. HDB is assessing each of these appeals and it will make an appropriate decision on each case, as merited by the details of the case.

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, I am very concerned about what the Minister has said that he would not know the impact of the market in one year's time, following the repeated measures that he introduced in the real estate market. I am very sure that the Minister, based on the statistics that he has, would be able to know or at least

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understand the upper limit of the reaction of the market and the parameters that he has set. We just want to understand the Minister's prediction based on those parameters. Would he continue to introduce measures to curb real estate prices, and will they be reduced or increased further?

Mr Mah Bow Tan: Mr Speaker, Sir, the way the market behaves depends on many, many factors. The current situation is not unique to Singapore. Many other economies in the region are also very concerned about a property bubble forming. Members would be aware that recently the governments in Hong Kong, China and Taiwan concerned about a property bubble forming, in fact, have implemented various measures to cool the market, somewhat similar to ours but in varying degrees.

It is very difficult for anyone to predict or determine what the market is going to be like in a year's time. In fact, in my reply, I mentioned that even for this year, for September, when we implemented the measures in end of August, it is still too early for us to tell what the full impact of these measures is. The market is a dynamic one and how the market reacts to these measures will depend not just on the measures themselves but also on what happens elsewhere – what is the liquidity in the market, what is the interest rate like, what are the kinds of funds that are coming in, what are the alternative investments and the psychology of the market. Given these many factors involved in shaping the market, I think it would be presumptuous or even foolhardy of me to predict what the market would be like in one year.

Will we be announcing more measures? It ultimately depends on the situation. We have taken an approach of having few calibrated steps rather than one big-bang approach to try to cool the market. By taking these calibrated steps one at a time, we are able to let the air

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out of the bubble as it were gradually, rather than to prick the bubble and let it burst. Because when the property bubble burst, a lot of people would be hurt, not to mention the economy as a whole. That is the reason we have taken this calibrated approach. Of course, each time we do this, some people would be affected. But it is far better for us to take this approach and to make sure that people are aware of the implications of a bubble forming rather than to have a big-bang approach where many people would be hurt and the unintended consequences of that may be even more severe than what we wanted to have.

Mdm Ho Geok Choo: Sir, I have one supplementary question for the Minister. I would like to ask the Minister, besides the imposition of the seller's stamp duty, what other criteria are applied to PRs and foreigners purchasing private residential properties in order for the Government to ensure that we have a better differentiation of citizens and PRs that can be achieved through rights to landed properties in Singapore.

Mr Mah Bow Tan: I do not think the Member is suggesting that we totally close off the market to the PRs and foreigners. What I think the Member is asking is: what are the criteria we use to monitor the purchase of properties by PRs and foreigners? For landed properties, the Residential Property Act is supervised by the Ministry of Law, which restricts the purchase of landed properties by PRs to only those who make a contribution or significant contribution to Singapore. The rest of the market for non-landed properties is open to all. We are a cosmopolitan city, and I think it is important for us to remain so. So, foreigners and PRs should be allowed to buy properties. Many of them work and invest here. It is not a question of not allowing any purchases by foreigners or PRs at all.

It is

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to monitor how much of the market is actually made up of foreigners and PRs. In fact, our statistics show consistently that even at the height of the market, the majority of the buyers in the private property market are Singaporeans.

Sir, we have had from time to time taken measures to try to calibrate this if we see that the numbers are going up. We have made changes to the stamp duty by imposing a seller's stamp duty. We have changed the period whereby the seller's stamp duty applies from one year to three years. We had, in the past, implemented other measures as well, for example, the taking up of loans by foreigners. So, we will continue to monitor the market closely. I think that is the best we can do at this stage and where we see that there is a danger of the market heating up further or not moving in a healthy direction, we reserve the right to take the appropriate action.

Mr Speaker: Mr Lim Biow Chuan, last question.

Mr Lim Biow Chuan (Marine Parade): Sir, the feedback I have is that there have been so many changes in the rules that they have caused quite a lot of inconvenience to the residents. Can I ask the Minister whether the HDB has studied the benefits of having so many policy changes versus the inconvenience caused to the many residents that we have? Can there be a step-by-step increase in the measures taken instead of having so many steps at one go, including the increase in MOP, the stamp duty as well as the restriction on ownership of foreign properties? Can there be a more staggered approach rather than so many policy changes at one go?

Mr Mah Bow Tan: Let me take one step back to explain what are the fundamental reasons for these changes. There are three reasons I would like to offer to the House for the measures that

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we have taken. Two of the reasons pertain to the HDB market and the third, the broader property market.

For HDB, the first point is that we really want to reinforce this policy objective that HDB flats are primarily for long-term owner-occupation, not short-term investment, not speculation. By increasing the Minimum-Occupation Period (MOP) from one year, then to three years and to five years recently for non-subsidised flats, we reinforce this point. What this does is to discourage people or prospective buyers whose interest is to buy for a quick capital gain or for rental yield, and not for long-term owner-occupation, not to stay in for the long term.

The second fundamental reason we introduced these measures is to help first-time buyers to buy their first flat. First-time homeowners, I think Members would agree, are in more urgent need of a home or a flat to start a family. Currently, we have rules that govern subsidised flats. I have mentioned one of them earlier which is the no concurrent ownership rule. For subsidised flats, if you buy a new HDB flat, you are not allowed within that MOP period to concurrently own that flat and private property. What we did was simply apply that same rule – no concurrent ownership – to buyers of non-subsidised flats. It was a very straightforward move to align the policy for both subsidised and non-subsidised flats. But when we did that, of course, there were people who were affected or people who were, as the Member suggested, inconvenienced. But what it did do was to dampen the demand from those who already have a private property so as to prevent them from competing in the same market with the first-time home owners. By not competing with the young couples, by holding back their purchases, we are actually reducing the demand for resale flats at this point in time. I think we are beginning to see the impact of that. Resale transactions are

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coming down. I believe that the prices are starting to stabilise and, in fact, coming down slightly. The COVs are also coming down. That is as far as the HDB market is concerned.

The third reason is that we want to prevent this property bubble from forming in the overall market. We have done this in several calibrated steps. We do not want to slam on the brakes straightaway but we want to just tap on the brakes gently as we see the property market starting to heat up. That has helped people to understand or at least be a little more careful and cautious about their property purchases. Being prudent about property purchases is not a bad thing. In fact, many of the people who are complaining, who are upset with the new property measures, are those who feel that they are being prevented from joining the party. They think there is a party going on, so why are we preventing them from making money, but they forget that that party may end. It is better for us to add a dose of caution to let people be more careful about their purchases. We are not preventing people from upgrading. You can continue to do so. You can continue to get a loan. But instead of getting a loan for 80% of the purchase value, you now get 70%. If residents can afford the 30% downpayment and take a loan of 70% of the property value, they can still upgrade.

Those are the three fundamental reasons we are acting the way we have. We want to take careful, calibrated steps. We do not want to make it one big bang. How many steps we have taken previously and in the future really depends on how the market reacts to this particular adjustment.

Finally, I submit that what we are doing will benefit everybody – those who are in the market today, those who are already homeowners as well as those who are thinking of buying because a stable

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property market will benefit everybody concerned.