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Healthier for economy in long run to retain ABSD

The report “Right time to tweak property cooling measures: CDL Chief” (Feb 8) stated that Mr Kwek Leng Beng had called for a removal of the Additional Buyer’s Stamp Duty (ABSD) for locals and foreigners. This would be a mistake.

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Alex Lee Sao Wei

The report “Right time to tweak property cooling measures: CDL Chief” (Feb 8) stated that Mr Kwek Leng Beng had called for a removal of the Additional Buyer’s Stamp Duty (ABSD) for locals and foreigners. This would be a mistake.

Both foreigners and locals continue to buy properties despite the ABSD. In 2012, more than 8,200 transactions generated S$760 million in total ABSD. Several projects launched in recent months have found buyers for over 80 per cent of their units, proving that properties priced appropriately can still be sold.

Understandably, developers may be unwilling to reduce prices for fear of reducing their profit margins. The former may be painful in the short run, but is healthier for the economy and the real estate industry in the long run.

Since 2009, skyrocketing property prices have led to widespread perception that property investing and development in Singapore is a quick way to get rich. Many new players, local and foreign, have entered the industry.

Local entrants have come from a range of businesses as diverse as electronics, stockbroking, media, jewellery, stationery, food and beverage, entertainment and wellness. Foreign developers who have entered the market are among the most aggressive land bidders here.

While several companies have abandoned their core businesses to become developers, many individuals have switched careers to become property agents.

There are unseen economic costs when a portion of our limited resources is diverted from other productive industries to real estate.

As property prices have risen beyond the reach of many Singaporeans, a correction would be received warmly, in particular, by younger Singaporeans hoping to buy their first property.

As prices fall, developers’ profit margins would normalise to more sustainable levels. Fewer firms, local and foreign, would join the industry. Some developers, disenchanted by slower growth and thinner margins, may call it quits. All this would restore market sanity.

In recent years, I have heard various myths about property investing in Singapore. One of them is that buying property here is “pao chiak” (“a sure win” in Hokkien) because the Government has a vested interest to ensure that prices never fall.

Removing the property curbs prematurely would be a signal to the market that this myth is actually true. Prices would resume climbing rapidly, and the market could by then be resistant to further cooling measures.

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