Govt should intervene early to prevent property prices from soaring again

I refer to the report, “Spike in en-bloc sales may not lead to property bubble: Lawrence Wong” (Nov 6).

While Mr Wong is right to say that developers are subject to demand-and-supply forces in the market, en-bloc sales put upward pressure on market prices for another reason: They distort market prices.

This happens because the sales artificially create a significant number of new market participants in the form of property hunters who have sold their homes during the en-bloc sales and have to find replacement residences within a relatively short period of time. The 2,700 private residential units sold en bloc so far this year is far higher than the 600 sold last year and is equal to 16 per cent of all private residential transactions (new launches, resale, sub-sale) last year.

Secondly, these owners are likely to be less price-sensitive in their housing search because of the “en bloc windfall” they have received. They may be willing to pay higher-than-market prices for their next homes.

The entry of property developers from China, which are willing to pay record or elevated prices, exacerbates this problem.

Thirdly, with the owners of many older developments hoping for a collective sale of their homes, their properties are effectively removed from the general market, thus reducing supply.

The combination of these factors above will inevitably distort market prices.

The Ministry of National Development has worked to rein in and maintain stable property prices through a series of cooling measures. However, its efforts risk becoming undone as a result of such “distortions” brought about by the recent series of en-bloc sales.

In land-scarce Singapore, residential properties should first and foremost be places where buyers live in them, and not so much for investment purposes. Government policy should be heavily weighted towards keeping them affordable for owner-occupiers in the public and private markets. I would urge the Government to act early, ahead of the curve, to prevent property prices from soaring again.