Are concerns over the surge in the property market justified? How effective are the recent measures to moderate the market, and does more need to be d

The loose monetary conditions globally and a pervasive low interest rate regime are partial reasons for the property asset inflation witnessed in Singapore. Without any interventions, the demand and prices may escalate to levels that may be incompatible and inconsistent with the economic realism and fundamentals. The surge in demand and prices are unexpected in the light of a certain contraction in the first half of 2009. The second half of 2009 saw the built-up of investment momentum and the subsequently ballistic run on property prices.



The government’s announcement of cooling-off measures like the stamp duties imposition on sellers is at best a dampener. The boom-bust cycles are getting too short and too unpredictable Cooling measures must be let in to slow down the sudden spike and fall of prices which will otherwise cause shocks to the market. Elements of speculative trading activities must be brought to a low and to reduce short-term arbitrage opportunities which also may cause asset price distortions.



One best way for the government to cool off the market is to work on the supply-side equation by putting up more land sales and leave the market to decide how high it should bid for the property. Any other interventions like minimum holding period before flip or sub-sale tax for uncompleted properties or even capital gain tax in tiered format may be intrusive for a free market.



Today’s economic recovery combined with low borrowing costs set off this massive increase in property prices which seemed so right and irresistible to the heartland upgraders. The HDB prices remained relatively stable with strong resistance to price deterioration during most part of 2008 till first half of 2009 compared with private properties.



Singapore can least afford a run on its property prices as many Singaporeans’ fortune are intricately tied to property and prices must be built on firm fundamentals and less of froths. Government’s interventionist approach is needed but there must be clarity on the extent of policy tightening so that genuine buyers can factor those policies in their decision making process in the mid to long term.