There comes a point when the free market can unleash havoc on a population. It is only for the good of them that the government intervene before that point is reached. In this case, the foreign buying has pushed prices so high that they are a political time bomb -- and it could lead to class envy & social unrest. Imagine ordinary terrace houses worth $1.5 million and condos easily exceeding $1 million. There are many Singaporeans, esp the young in their 20s and early 30s who cannot believe that such properties are out of their reach. The govt has brought out its bazooka -- the 10% additional stamp duty -- to keep foreign capital at bay. There will come a point when it's ok to withdraw the fire power and let free market forces go play the game.
It's true that runaway property prices are not what governments want to see happening. It's good only for a small band of investors but bad for the masses who are priced out of the market. Last Friday, 9 Dec, the Politburo of the Communist Party of China held a meeting and decided to continue to tighten the property market in 2012. More importantly, the meeting statement said the Communist Party was committed to bringing property prices down to a reasonable level, implying that the current fall in property prices was far from over.
Singapore is not alone. Other regional govts, esp China, have imposed measures to cool property prices in their respective countries.
The lessons for investors is stern govt measures will limit the upside of property prices.
As a result, property stocks aren't going to enjoy strong run-ups that they used to as there will be lower visibility of the market amid strong uncertainty over timing and extent of future government intervention.
December 13, 2011 What benefit from property investment?
Letter from Raymond Chua Soo Chew
DO PROPERTY investments truly benefit Singapore, besides figuratively contributing to Gross Domestic Product? I urge for a deeper analysis of this.
About 90 per cent of Singaporeans own their homes, but higher property prices since 1995 have not made Singaporeans feel wealthier. Instead, higher prices have led to anxiety over home affordability for our next generation and to highly leveraged new home-owners.
Property investment is nonproductive for the economy. We import substantial resources and labour to build these homes, which — in turn — strain our transport, accommodation and community infrastructure as well as cause a currency out-flow.
Business competitiveness suffers as operating costs increase with higher worker accommodation expenses. This drives up cost of living.
Households also have less savings, and quality of life suffers as they worry about losing their jobs, much needed to finance their homes. This reduces our ability and attractiveness in seeking entrepreneurial ventures.
The only winners are a select group who have multiple houses, property developers and, to a lesser extent, property agents.
On a macro level, property investment can be destabilising to a country’s economy and financial institutions, as seen in the United States sub-prime mortgage mess, the property bubble in Japan and the property collapse in Ireland, Spain and Greece.
What benefit has it brought to these countries?
Last week’s move to discourage foreign investment in property here should be applauded, and I hope Singapore will think clearly on why we would want foreigners to invest in our property at all.
When things get real cheap, and sentiment is negative, there are deep pockets which will buy and buy at bargain prices. Look at China property companies' towkays. Bloomberg has just reported that "executives of Chinese developers including Shimao Property
and Glorious Property
are buying the most stock in their companies since at least 2008, betting the government will ease curbs on the property market
that had depressed the shares."
I am certain that the additional buyer's stamp duty targeting foreigners has its roots in the GE2011, where the people signalled their unhappiness with rising property prices. It follows that the stamp duty will not be a temporary measure that you can expect will be lifted a year or more from now. I was glad to read in ST today that Bank of America Merrill Lynch economist said he thinks it is a permanent fixture and would stay in place even after the property market cools.
The economist Chua Hak Bin said: 'The 1996 measures were seen as more of a move to cool the market, but this round seems more like a political move,' he said.
He added that the latest steps are in line with the Government's aim to differentiate the privileges and rights of Singaporeans, permanent residents and foreigners.
This guy Tan Kok Tim has made a good point! However, I disagree on the $2-m threshold as I think it should be $3 million in order to protect more of our local ownership.
Bar foreigners from buying property priced at less than $2 million.' MR TAN KOK TIM: 'An additional measure to control foreign speculation in local property is to bar foreigners from buying property priced at less than, say, $2 million each. ('Singapore's property investment climate still among world's most open' by Mr Ed Cheong; Dec 12)
This will allow rich foreigners the option of speculating in our high-end property market to take on the local super-rich and betting on the Singapore dollar. Private properties valued at less than $2 million will then be less subject to price escalation and foreign speculation. The middle-income group and those who wish to upgrade from HDB flats will find it more affordable.'