Fierce competition among developers may be why fresh curbs are needed
Thu, Jul 26, 2018
This axiom is starkly exemplified by the strong reactions of the property industry to the latest housing cooling measures that took effect on July 6.
The Real Estate Developers' Association of Singapore (Redas) has insisted that there is no rationale for the tough measures, which included raising the additional buyer's stamp duty (ABSD) for most categories of buyers as well as imposing a new non-remittable ABSD of 5 per cent on developers' purchase of residential properties for development.
It asserted in a statement that the property market was "in the early stages of a recovery that was in line with economic fundamentals", and should "be allowed time to find its own course and reach a sustained equilibrium".
Last Tuesday, Redas president Augustine Tan reiterated this point at a property seminar, citing the 3.6 per cent expansion last year in the Singapore economy and a first-quarter growth of 4.3 per cent this year. He compared this to the pace of price increase in private homes, by 3.9 per cent and 3.4 per cent in the first and second quarter, respectively. This came in the wake of home prices rising 1.1 per cent last year, following two years of decline: 3.7 per cent in 2015 and 3.1 per cent in 2016.
"The market is barely into its first year of recovery, and has not been allowed time to find its own course and reach a sustained supply-demand equilibrium," he argued.
But the authorities held a different view. On the same day as Mr Tan's speech, The Straits Times' forum page carried a joint letter from the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore explaining the rationale for the tougher measures.
Unlike the last up cycle when the government intervened after a very sharp rise in private home prices that required eight rounds of measures to cool the fervour, this time it has acted earlier to steady the cycle, they wrote, noting that prices increased more than 9 per cent in 12 months, reversing much of the 12 per cent decline over the preceding 48 months. "The latest measures have focused especially on developers, who have been bidding aggressively for residential land and pricing units higher," they said.
Therein lies the crux of the matter. Redas was relying on past data to call for a lighter regulatory hand. The government, on the other hand, took into account additional factors, one of which must surely be the collective-sale frenzy. In the first six months of 2018 alone, more than S$10 billion worth of en bloc sales were closed, compared with S$9 billion for the whole of 2017 - which in itself was already quite impressive. More worryingly, developers were paying record prices for many of the sites.
There were other signs of an exuberant land market. In March, a tender for an executive condominium site at Sumang Walk in Punggol drew 17 bids, with each and every one of them higher than the previous record set in July 2013.
Inevitably, the aggressive bids at the wholesale level have started to translate into higher home prices and create anxieties among buyers. As developers operate in an intensely competitive environment, it is wishful thinking that the industry can exercise self restraint.
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