Property cooling measures scuppered ‘long awaited’ recovery, could worsen supply glut: Redas

SINGAPORE — The Government's latest cooling measures have halted the "long awaited" recovery of the property market, and could worsen a supply glut, Real Estate Developers' Association of Singapore (Redas) president Augustine Tan said on Tuesday (July 17).

Speaking at a seminar organised by the association, Mr Tan said the property market was just beginning to "see some light in the tunnel" after a long lull, with prices declining by 11.6 per cent between 2013 and 2017.

On the back of a stronger economy and recovery in employment growth, sentiments in the property market had improved, with transaction volumes going up last year as prices rebounded, he noted. However, the market was barely into its first year of recovery, and has not reached a "sustained supply-demand equilibrium" when the cooling measures were rolled out on July 5.

A day after the Government's intervention, Redas said it saw "no rationale" for the fresh round of property cooling measures. Describing these measures as "tough", the association pointed out that the property market is "in the early stages of a recovery and the recovery is in line with economic fundamentals".

On Tuesday, Mr Tan cautioned that the oversupply situation could be exacerbated. The current unsold inventory and new supply totalling more than 59,500 units are sufficient to meet demand for about six to seven years, he estimated. This is on the assumption that the 6,500 displaced owners from successful collective sales from last year till the first half of this year do not downgrade to public housing, he said.

The cooling measures would also raise the cost of buying homes, and deter investors and foreigners who have just regained confidence in the property market, he said. The higher Additional Buyers' Stamp Duty (ABSD) of 25 per cent, as well as a non-remittable 5 per cent ABSD for developers is a big setback for the market, he reiterated. "Against this backdrop, the confidence of investors and buyers as well as developers could be eroded," he added.

However, CIMB economist Song Seng Wun said the latest measures from the Government were pre-emptive, in view of medium-term and long-term risks ahead.

Mr Song, who was giving a presentation at the seminar, said that downside risks for the second half of this year and beyond have increased as a result of trade tensions between the United States and China, as well as rising interest rates.

Given that Singapore's growth indicators are currently still healthy, he said that policy makers believed that the economy and property market are robust enough to take any hit to buying sentiments as a result of the cooling measures.

"We are not likely to see a crash on property despite harsh measures being implemented," said Mr Song.

He added that if the Government took action later when the economy has softened, it will cause a sharper correction in the property market. There would be more serious consequences on household balance sheets if demand were to fall when prices are elevated, he pointed out. "It's how high you fall from," he noted

Mr Song also said that previous property cycles cannot be used as a benchmark due to long-term demographic shifts in the country. Referring to a chart showing a growing number of deaths and fewer births in Singapore, Mr Song said this long-term trend would affect the demand for property in the future.

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