Steps to cool property market working: Mah

[mr funny]

http://www.straitstimes.com/News/Hom...ry_608207.html

Nov 28, 2010

Steps to cool property market working: Mah

But minister says situation being closely watched, promises more action if needed

By Elgin Toh


Signs are emerging in the public and private housing markets that the Government's three-month- old price stabilisation measures are working, says National Development Minister Mah Bow Tan.

The effect is more pronounced in the resale Housing Board market, where median cash over valuation (COV) payments in October fell to $25,000, from $30,000 in the previous quarter, Mr Mah said yesterday.

And COV numbers for November transactions so far indicate a further decrease, he added. COV, which is the cash premium paid by a buyer over and above the valuation of a flat, is one measure of how hot the demand for HDB resale homes is.

Transactions in the HDB market have fallen by 30 per cent in the fourth quarter thus far, against the previous quarter.

In the private property market, prices are still rising but the increases have moderated, Mr Mah pointed out.

Last month, the Urban Redevelopment Authority announced that private residential prices rose 2.9 per cent in the third quarter of this year. This represented a step-down from the previous quarter, when prices jumped 5.3 per cent.

'So, all in all, I would say the cooling measures are starting to take effect, but the overall impact is still too early to tell,' he said.

Mr Mah was speaking to reporters on the sidelines of a groundbreaking event for new HDB flats in the Dawson estate.

The Government announced a slew of measures on Aug 30 to rein in record-high prices in the housing market. These included lower bank loan limits for second properties and tighter ownership rules for buyers of HDB flats.

Yesterday, the minister, who has had to face criticism from opposition parties on the housing affordability issue, said the steps taken have achieved the desired effect of discouraging potential HDB flat buyers not in urgent need of housing, including those who already own private property.

A less feverish market will make it easier for more first-time buyers to purchase resale flats, he said.

However, Mr Mah was also quick to flag a few concerns.

Low interest rates and an abundance of investor liquidity elsewhere, for example, could yet push real estate prices back up.

Furthermore, anti-speculation measures in property markets like Hong Kong, Taiwan, mainland China and South Korea - some more restrictive than the ones here - may result in a 'diversion of funds into Singapore'.

In view of this, the Government will introduce more measures to curb property prices if there is a need to, said Mr Mah.

But he stressed that the Aug 30 measures had just been implemented, so the Government would simply continue monitoring the market for now.

'We're watching it constantly, watching it like a hawk, let me assure you,' he said.

Yesterday, Mr Mah also reiterated the Government's overall policy on handling housing prices.

Its approach, he said, was to pre-empt the growth of bubbles by deflating them slowly, rather than bursting them suddenly. He likened the calibrated steps by the Government to tapping on the brakes of a car.

'If we slam on the brakes all at once, then people may get thrown out of the window, people may get hurt, and worse still, the engine may stall,' he said.

The current approach differs from 1996's more drastic measures - including a capital gains tax - that caused the market to crash.

He added that the Government's goal was not to avoid price increases entirely, but to make sure that property market prices do not outstrip economic fundamentals.

Real estate agents contacted yesterday said the overall declines in COV and HDB flat transactions mentioned by the minister echoed what they have been seeing in the deals they have been involved in.

But they also said that private housing was unlikely to become cheaper any time soon.

Mr Eugene Lim, associate director of ERA Asia Pacific, said: 'The cost of financing remains cheap, and the strong currency is also attracting foreigners. While the Government is doing a lot to moderate the private property market, I don't expect prices to dip unless there's a recession.'

And despite the cooling, at least one potential first-time HDB buyer is still adopting a wait-and-see attitude.

Engineer Darren Lim, 27, who lives with his parents, said: 'COV may have fallen, but the total sale price is still too high. I will enter the market if COV falls by another $10,000.'

[email protected]

[hyenergix]

This is twisting statistics. MBT should quote the actual prices of the houses, which is still increasing. You can have $0 COV yet prices are increasing as in the case of people buying private houses.

[kingkong1984]

This news is comforting that the measures worked. If not more drastic measures will be introduced. Anyway, how will it look if nothing had worked?

[Antz621]

This is twisting statistics. MBT should quote the actual prices of the houses, which is still increasing. You can have $0 COV yet prices are increasing as in the case of people buying private houses.

Yes.

Before Cooling Measures: $420K with COV 80K
After Cooling Measures: $475K with COV 25K

So did it worked? You bet!

羊毛出在羊身上

[nonameleh]

Ya, but very strange, how come there are so much 羊毛? From the 红毛？

[Antz621]

Ya, but very strange, how come there are so much 羊毛? From the 红毛？

黄毛 more like it

My HDB block alone got 3 new neighbors moved in this year. All Cheena. Their COV paid are anything above 50k.

[smallant]

You people should be thankful ! Tis part of asset enchancement program !

[DC33_2008]

DBS reports that more hot money coming this way early 2011. Maybe really time to sell off some of the properties

[kingkong1984]

DBS reports that more hot money coming this way early 2011. Maybe really time to sell off some of the properties

I dun understand.. I thought hot money is good... can pump up the prices of stocks and properties. That's why cooling measures hope to address that issue.

I am wondering what kind of effect hot money will do to the Singapore economy. If it is really hot, until neutralise the cooling measures... the property prices will head where?

[wenqing]

Minister Mah has been writing alot to MSM lately this period, what is his motivation ??

Why need so many cooling measures ??

Are his solutions talented ??

November to December is traditionally quiet period in property market because most people are busy with festive periods and holidays.

Cooling measures work or is it Tradition that is working ??

Is everything because of elections as implied by Mah himself ??

Is he getting desperate because market talk says he screw up the housing in Singapore and may be highly voted out ??

[hyenergix]

This news is comforting that the measures worked. If not more drastic measures will be introduced. Anyway, how will it look if nothing had worked?

They created the housing problems in the first place... The GLS next year may be another late measure which spells trouble for the condos, especially the 99LH types. I'm not sure why they are so obsessed with releasing new land for condos.

There are still many people who have poor living conditions in rented flats. The government should at least take care of these people by building more *really* subsidised flats for them.

Do ICA (for immigration), MOM (for manpower), HDB (for housing) and MCYS (for people in need) talk to one another? Now also because of LTA's poor projection of car population, condo owners now have problems with parking.

[wenqing]

They created the housing problems in the first place... The GLS next year may be another late measure which spells trouble for the condos, especially the 99LH types. I'm not sure why they are so obsessed with releasing new land for condos.

There are still many people who have poor living conditions in rented flats. The government should at least take care of these people by building more *really* subsidised flats for them.

Do ICA (for immigration), MOM (for manpower), HDB (for housing) and MCYS (for people in need) talk to one another? Now also because of LTA's poor projection of car population, condo owners now have problems with parking.

• Not enough HDB flats were built.
• Not enough HDB carparks were built
• Not enough private property was built.
• Not enough jobs for Singaporeans.
• Not enough population but propery prices can skyrocket.

Is something missing around here ??

What do Ministers do at Cabinet meetings, talk about anything but real issues ???

yep, obvious, all the departments working in silos and not as a team.

[DC33_2008]

Time to sell when property prices head north early next year. Garmen will implement next round of cooling measures. Waterview is already selling quite well last weekend.

I dun understand.. I thought hot money is good... can pump up the prices of stocks and properties. That's why cooling measures hope to address that issue.

I am wondering what kind of effect hot money will do to the Singapore economy. If it is really hot, until neutralise the cooling measures... the property prices will head where?

[wenqing]

http://www.temasekreview.com/2010/11...ete-sales-job/

Housing minister’s frustratingly incomplete sales job



In his second commentary written for Today newspaper, Minister for National Development Mah Bow Tan addressed complaints that public housing is becoming unaffordable. I wonder how many people he managed to convince when much needed data was missing and there were considerable holes in his arguments.

If you have not read Mah’s two articles, may I suggest you first read them in these archived pages: Part 1 — Pricing flats according to their value and Part 2 — Are HDB flats affordable?

This essay largely focuses on issues he raised in the second of his two commentary articles.

Before proceeding, it is important to note that that there are two markets for public housing. One is that of new flats built and sold by the Housing and Development Board (HDB). The other is called the “resale market” where leaseholders (called “homeowners” in Singapore-speak) can sell their leases to others after they have lived in their flat for a minimum number of years.

For new flats, there is are income ceilings for eligibility to buy, based on the type of flats. It is currently S$8,000 monthly household income for most types of flats; S$10,000 for higher-end flats.

Mah’s three measures to ensure affordability

In the second of his two articles, Mah devoted a section on “Measures to ensure affordability” in which he spoke about three discounts or subsidies.
1. The HDB prices new flats below market value — this was discussed in greater detail in Part 1 of my essay.

2. For first-time home-owners wanting to buy flats from the resale market, there is a grant of S$30,000 to S$40,000.

3. For those whose monthly household income is below S$5,000 a month, there is an additional grant of up to $40,000. I think it’s for first-time home-owners only, but he didn’t say so.

He did say, however, that this additional grant is available for purchases of both new and resale flats.

It was an unsatisfactory discussion. Nowhere did the minister set out what were the typical selling prices of various types of flats and therefore what would be the net prices after these discounts or subsidies.

It’s like a salesman who keeps on telling you how wonderful the $250 discount is that he is giving you for the product he is trying to sell without ever discussing what the gross or net price would be.

I did however manage to find a table provided by Yap Chin Peng accompanying a letter he wrote to the Straits Times on 12 September 2009. Yap signed off as the Deputy Chief Executive Officer (Estates and Corporate) of the HDB. Let me reproduce that table here:



You can see from the table prices of new flats in new estates (i.e. the relatively distant ones). You can also see that only those buying 2-room (i.e. 1 bedroom) flats get the full $40,000 Additional Housing Grant that Mah boasted of.

This reduces the net price of a typical 2-room flat to S$56,000. Based , I believe (by calculating backwards), on a 20-year loan (for 80 percent of $56,000) at around 2.5 percent annual interest, the buyer needs to pay $224 a month, or 17 percent of his monthly income.




That doesn’t look too bad, does it? It sounds affordable.
However, it begs one question: How many 2-room flats does the government build?


I couldn’t find building statistics from the HDB’s FY 2009/2010 Annual Report. What I did manage to find was their sales data, which I reproduce at right. 2-room flats constituted only 1.2 percent of all new flats sold.

Yet, approximately 10 percent of households in Singapore have that level of income (S$1,350 per month). So what do the rest do? Where do they live?


Do they find themselves compelled to purchase 3-room flats, either because 2-room flats are so rare or because they can’t squeeze the family into that small a flat, even though they really can’t afford 3-room flats at their present prices? Do they then fall into arrears with mortgage payments? Do they borrow from loan sharks?


You won’t find answers from Mah Bow Tan’s essays.

House price-to-income ratios

Even more problematic was the section “Measures of affordability”. Mah listed two: House price-to-income ratio (HPI) and Debt-service ratio (DSR).

For HPI, he cited figures that compared Singapore favourably with Hong Kong and London:

In a Straits Times article in February 2010, two NUS professors, Tu Yong and Yu Shi Ming, noted that Singapore’s HPI for resale flats in non-mature estates is 5.8, compared to Hong Kong’s 19.8 and London’s 7.1.

That means Singaporeans generally need 5.8 times of their annual household income to buy a resale flat in non-mature estates, whereas a Hong Kong resident needs more than three times that amount.

First of all, how is HPI calculated? This indicator is defined as the ratio of the median free-market price of a dwelling unit to the median annual household income. Source.

Then I went to the library to look up Tu Yong’s and Yu Shi Ming’s article. I found it in the 27 Feb 2010 edition of the Straits Times, published in conjunction with the HDB’s 50th anniversary. . . . which immediately made me suspicious. The HPI indices were not in the body of the text; they were in Table 2 accompanying the article:




Read the notes; your eyes will open wide. You will see that Singapore’s HPI of 5.8 is too low and Hong Kong’s 19.8 is probably too high.

Singapore’s “low” house price to income ratio (HPI) of 5.8 is arrived at by dividing the median HDB resale price of non-mature estates by the median household income of all resident households (i.e. including those in fancy private condominiums and bungalows).

I checked the source of Tu and Yu’s figure of $4,950 and saw that it came from the Statistics Department — it’s right there in the second paragraph of the linked pdf page — and indeed it refers to all resident households in 2008 (yes, 2008, even though the NUS professors said 2009 in their footnotes).

Why only non-mature estates, where flats tends to be cheaper?

To be meaningful, it should be all resale flats. And if we wish to compare with other cities where public housing is not as predominant, then we should use the prices of all residential units, not just HDB units.


Alternatively, the minister should confine himself to prices of new flats versus the median income of households with under $8,000 in monthly household income. That’s because $8,000 is the eligibility limit. The HPI of that segment is what the minister is directly responsible for.


The HPI for Hong Kong suffers from a different defect. It is based on the prices of flats on Hong Kong Island only. What about the vast number of cheaper flats in the satellite towns of the New Territories?

Why were they excluded? Is it any surprise that Hong Kong then has a very high HPI? In any case, the lower third of Hong Kong’s households live in rental public housing, they are not in the market for purchase.

If one excludes their median household incomes, then you’d likely find the median household income of those Hongkongers who are looking to purchase will be significantly higher, thereby making the HPI much lower.




Conclusion: The HPI figures in the 27 February 2010 article by Tu and Yu are seriously flawed. However, our minister Mah relies on them to “prove” that HDB flats are affordable.


Curiously, there was a table published in the Straits Times on 5 September 2009, which showed Singapore to have the 10th highest HPI in the world — at 14.35! (I reproduce the top part of the table at right.)

The figure is so vastly different from the 5.8 that Mah cited, one really can’t give credence to either of them.


I also did a quick websearch of articles relating to HPI. There seems to be a consensus that financial prudence calls for an HPI not exceeding 3.0, i.e. people shouldn’t be paying more than three times their annual household income for a home.

This makes sense. If we expect someone to put aside the maximum 30 percent of his annual income to service the mortgage, then over 10 years, it should add up to about 3 times his income.

Here in Singapore, we seem to be assuming that it is safe to take loans of up to 30 years’ duration. I have always thought that unsound.


Debt-service ratio


Mah Bow Tan also said that another measure, the Debt-service ratio (DSR) also indicates that HDB flats are affordable. DSR is the percentage of income required to cover payments associated with housing costs:

The DSR for new HDB flats in non-mature estates, based on an industry norm of a 30-year loan, averaged 23 per cent this year. This is well within the 30-35 per cent international benchmark for affordable expenditure on housing.

Hazel Poa demolished his argument in the Reform Party’s blog VotingRP:


Next, we consider the suitability of the debt-service-ratio (DSR) as a measure of affordability for national planning purposes.

There are several shortcomings, the most serious being a pre-qualified sample – the DSR is calculated based on existing home owners. These are people who can afford to buy the flat.

Those who cannot afford to buy a HDB flat would not have bought one and hence would not be captured by the DSR. The loan application process would also have weeded out those whose DSR would exceed the “30-35 per cent international benchmark for affordable expenditure on housing”.

Under such circumstances, it would be quite difficult for an examination of the DSR to turn out with an “unaffordable” rating, no matter what the price level.

For example, if good class bungalow owners use only 15% of their income to service their mortgages, can we conclude that good class bungalows are very affordable?


The DSR is a reasonable measure to assess if a particular person/family can afford to buy a particular property, but to use that as a gauge of affordability for the general population leaves much to be desired.
She said it so well, there’s nothing more I need to add.

More data needed for each band of household income



More generally, I was disappointed that Mah continues to use an approach that looks only at broad averages. With the wide income gap in Singapore, it is necessary to disaggregate any analysis on affordability into income bands.

In the table at left you will see that the lowest ten percent of households by earned income has only an average of S$1,303 a month.

The seventh decile (i.e. the seventh 10-percent group) up the income scale has an average monthly household income of $7,969 per month, which is six times more. Yet all of them fall under the HDB income eligibility limit of $8,000 per month.

With this extreme spread, is it meaningful to speak of average this and average that?

I think not. I think it is necessary for the HDB and Mah to present data to show how HDB delivers affordable housing options to each decile, based on 10-year mortgages. What flats — and how many — are built that they can afford?

Below is the same data (from the Statistics Department) presented graphically.




And one more thing: The table and graph show only households with at least one working person.

9.6 percent of resident households are not even captured in the table and graph because they have no earned income. How assured is that roof over their heads?

Is it any wonder that we have an increasing number of homeless people? What does the state provide as housing options if they do not already own a fully-paid up home?


.
Author: Alex Au
* Alex Au is the author of website, http://www.yawningbread.org

[Geylang OKT]

Sell now or sell lower later

[nobrainer32007]

Y u so want price to drop like your pants? U dont own a single property isit? Poor thing....

Sell now or sell lower later

[wenqing]

Y u so want price to drop like your pants? U dont own a single property isit? Poor thing....

I think Minister Mah will be a happy man when tomorrow's news headlines says talented cooling measures have worked and Singapore property prices dropped by 50%.

[Geylang OKT]

Y u so want price to drop like your pants? U dont own a single property isit? Poor thing....

Hahahaha!

So soly so soly! I am a total newbie in the market. So please helicate me further

Unfortunately I have to reiterate my stand. Sell now or lose your panties going forward

[art10626]

» More foreigners buying new private homes (Straits Times 17 Dec)

FOREIGNERS were out in force in the property market last month, snapping up almost one in three new private homes in Singapore.

The growth appears to come from Chinese buyers, who are increasingly making their presence felt.

One reason for the rise in foreign purchases last month could be the recent property cooling measures rolled out in other Asian cities, say analysts.

Unless there is another round of property cooling measures, the number of foreign buyers will continue to rise, predicts OrangeTee executive director of residential Steven Tan.
____________________________________
Summarised from our favourite newspapers... not sure if this fits any definition of cooling measure working... behind the curve once again?

[Wild Falcon]

So next cooling measure may target foreign buyers - esp those who are not even residents here, just pure speculators.

[Regulators]

if target foreign buyers too much, how are property investors going to make money?

So next cooling measure may target foreign buyers - esp those who are not even residents here, just pure speculators.

[devilplate]

if target foreign buyers too much, how are property investors going to make money?

water ghosts hoping for more curbs mah

[Wild Falcon]

I sold one leh - now market seems to be heating up again.... Hopefully some curbs that that I can pick up one again? One thing is for sure, the RENTAL market is hot....

[art10626]

if target foreign buyers too much, how are property investors going to make money?

1/3 workforce foreigner, can't be too harsh i guess... but then again, is it no longer about HDB housing affordability but more of worry of a bubble now? HK measures so much harsher also not having major effect, I just wonder if gahmen will see that and give a really heavy dose of measures.

[teddybear]

That is not the most important. The most important is that Singapore will lose its reputation as a financial centre with free market and there goes bye bye all their effort to attract investors/fund managers/hedge funds etc to come to setup offices here and it could also be the cause of the start of the permanent downfall of Singapore's economy!

if target foreign buyers too much, how are property investors going to make money?

[DaytonaSS]

I sold one leh - now market seems to be heating up again.... Hopefully some curbs that that I can pick up one again? One thing is for sure, the RENTAL market is hot....

did u just invest in 1 for rental? thought i read somewhere. Hope u huat big time

[DaytonaSS]

1/3 workforce foreigner, can't be too harsh i guess... but then again, is it no longer about HDB housing affordability but more of worry of a bubble now? HK measures so much harsher also not having major effect, I just wonder if gahmen will see that and give a really heavy dose of measures.

feel that Govt do the right thing to control 90% of Singaporean public housing cost. Put policies so that everyone got chance to board the train n make some $$$. But.... private investments shouldnt curb too much ba.

from observations on the recent monetary policies and fiscal policies, increase exchange rates and keep interest rate low, it seems to be encouraging $$$$ n investments to come to Singapore.

We could be in a start of golden age. Just like early 1990+.

[Regulators]

i think MBT is just wayanging to show foreigners that he is doing something coz they are the ones complaining about office rentals climbing etc. MBT probably believes we still have some way to go when it comes to property prices, using cities like HK, Shanghai and Tokyo as benchmarks.

That is not the most important. The most important is that Singapore will lose its reputation as a financial centre with free market and there goes bye bye all their effort to attract investors/fund managers/hedge funds etc to come to setup offices here and it could also be the cause of the start of the permanent downfall of Singapore's economy!

[DaytonaSS]

i think MBT is just wayanging to show foreigners that he is doing something coz they are the ones complaining about office rentals climbing etc. MBT probably believes we still have some way to go when it comes to property prices, using cities like HK, Shanghai and Tokyo as benchmarks.

Just had a nice treat from a property agent. He predict more policies will come after GE to curb the buying......

i hope they wont curb too much, let the market have a good 8-10% growth a year will be nice.

[Regulators]

they probably reduce loan to 60% or 50%, but that will not deter rich foreign buyers who can afford to pay for the entire unit in cash. Singapore is so tiny, if all the rich people from all over the world flock here to buy properties one day, altering loan rates will not work anymore, may have to put a stop to foreigners buying or have some sort of COE bidding for the foreigners before they are entitled to buy singapore properties...lol

Just had a nice treat from a property agent. He predict more policies will come after GE to curb the buying......

i hope they wont curb too much, let the market have a good 8-10% growth a year will be nice.