Finally after the repeated warnings of overheat and booms in the property market in Asia, especially Singapore, the Singapore government now takes a realistic action to curb the housing speculators. The restrictions, like cooling measures last September and in February, are designed to stop a housing bubble forming but the property price kept hiking upward. With the strong economy growth forecasted in early 2010 and the lower interest rate, house buyer with no fear are speculating to buy and sell in the short term and earn a quick buck. People like me start to feel the property price is too high to reach and get stuck in between the choices of high rental and high housing price.
With the expectation of slow-down economy growth forecast, now Singapore government is proposing new game rules. Taking effect from August 30, the Ministry of Finance has increased the holding period for the imposition of seller’s stamp duty (SSD) from the current 1 year to 3 years. In addition, for property buyers who already have one or more outstanding housing loans at the time of a new housing purchase, the minimum cash payment has been increased from 5% to 10% of the valuation limit, and the loan-to-value (LTV) limit has been decreased, for housing loans granted by financial institutions to these buyers from the current 80% to 70%. The HDB owner has to maintain the ownership of the HDB flat for at least 5 years then is allowed to buy private apartment. Private flat owner who buys a 2nd hand HDB will need to sell off the private flat within 6 months. And the government is also bumping up the supply of public housing, including executive condominiums and allow the sandwich income class (monthly income between 8,000~10,000) to procure DBSS. I think this is a fantastic break through policy to rescue the middle-class income family or individual. With more than 50 brand condos TOP in 2010, I foresee a cool down market in sales and rental.
When I read the news of SG government’s efforts to moderate and stabilize the real estate price, I have to say that the Taiwan government is not doing enough. Except of lowering the interest rate, there is no efficient and fundamental policy to suppress the builders’ speculation activities. Everyday the coalition of builder’s land buy-off by force with the legal back-up of regulation have became unspoken scandals. Lower the interest rate only lessen little burden of the home buyers but that’s doesn't stop the builders from making big money. Housing price is pushed to the next peak again and again.
A theory about Taiwan housing price movement created by the professor Chang confirms what I think. In his book ‘’房地產的七堂課‘’, he advocates that the real estate market pricing trend has the historical character to act rapid price hikes in a very short period of time and then follows a long, slow, descending period which may last up to 8 years. When looking at the Singapore property market, similarly the price may not slump right away but hopefully we will see the speculation to be tightened and a more healthy and affordable property market to be. Buying a house is the most heaviest debt in most people’s lives. A good self awareness of why to buy where to buy is so important. It takes year to prove where the skyscraping housing price will go and how much further it may keep this upward trend.
From the historical market trend point of view, the crazy real estate market bubble appears in Asia right now is just like what happened a few years ago in Europe and the States. And we all witness the fall of the housing bubble which was in parts responsible for the Worldwide recession of 2008-2009 . The housing price changes occurred in these 2 major regions have proven that the unreasonable price hikes were simply exceptional cases and eventually the prices would come back to the historical norms.
The other book ‘Irrational exuberance’ written by by Yale University professor Robert Shiller also boldly points out the problem and blind spot of the housing bubble, especially in the States. Where he also tries to prove that home prices return, when adjusted for inflation, has produced very modest returns of less than 1%/year. Almost the same as the current bank saving interest.
The inflation-adjusted hour price in the graph has explained what Profession Chang and Shiller stand for. Why people still believe in the real estate agent’s ads - “home values always go up!” ? There is no place like home said in the Wizard of Oz. I believe it would be even better if we know the market trend and history before jumping in to any decision.
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