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Achieving a meaningful market correction of property prices

Property in construction (Image: Terry Xu)
By Property Soul
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam told the press that there is “some distance to go in achieving a meaningful correction”, hinting that the property cooling measures are here to stay.
I am surprised by Mr Tharman’s creative use of the word ‘meaningful’. It is an adjective or a descriptive word that leaves much room for imagination. It is up to the target audience to figure out the real meaning behind it.

When the government replies with a definite yes or no answer, you are certain what is next.
When the government replies with a vague answer, you are confused what to do next.
When the government replies with a descriptive answer, you are fear of what will be next.
– Property Soul

How to define meaningful?
The word ‘meaningful’ means significant or serious, meaning to say that the government would like to see a sizable market correction before they consider uplifting any buying restriction.
So, what does it mean for this meaningful word? Is it a major correction in price level? A massive slump in transaction volume? A prolonged depressed market? A big drop in the number of first-time or multiple-property buyers? Is it more meaningful to measure in percentage, indexes, values or length of time?
Waiting for the meaningful time
When the Singapore government will call for an election is everyone’s guess. The timing of the next election also gives uphold of cooling measures a whole new meaning.
With a majority of voters who find private properties unattainable or overpriced, it is meaningful to sacrifice the interests of a comparatively smaller group – namely the stakeholders in the real estate industry, including the developers, agents, consultants, mortgagees, landlords and owners. Afterall, it is a great opportunity to narrow the widening gap between the haves and don’t haves in the society.
On the other hand, if relaxation of cooling measures comes too late, and the property market continues to correct itself, it can make the final withdrawal meaningless.

I’m afraid that if you look at a thing long enough, it loses all of its meaning.
– Andy Warhol, American artist

Take the example of a primary school student who needs to do correction for a wrong answer. There are still mistakes after the correction and he is asked to redo the correction again. But there is still room for improvement so the teacher asks the student to redo it again and again. When the teacher finally puts that long-awaited tick there, the whole thing has long become meaningless in the eyes of the student.
From 1998 to 1999 and 2001 to 2005, there were countless introductions of property purchase incentives – suspension of land sales, lift of capital gains tax, property tax rebates, lower cash deposit, higher loan-to-value limit up to 90 percent, cash rebates and interest-free loans from the banks, etc. – but every time the market responded with a lower PPI (Property Price Index) and transaction volume compared with the last quarter.
Property, like comedy, is all about timing. Action is futile when it comes too early or too late.
What it means for different parties
We all have our own vested interest. Every time there is a new policy, we give it thumbs up or down depending on how we can benefit from it.
1. The public deserves some meaningful data.
Data from both Urban Redevelopment Authority (URA) and Singapore Real Estate Exchange (SRX) do not reflect the rebates and subsidies from developers to buyers. Lodgment of caveats is also based on voluntary submission. Property data is incomplete and PPI is inflated. What is the meaning of reporting the data when they do not mean to represent the full picture? (Read more in my previous post Developer invited you to play Project Discount)
2. Home buyers are waiting for a meaningful correction.
Mr Tharman’s words that the government cannot let “property prices run ahead of the growth of household incomes over the long term” are sweet as honey to people looking to buy an affordable private property. His comment especially means something to the home upgraders. They are all waiting for property prices to fall back to a level in par with general affordability again.
3. Sellers find cooling measures too mean.
The cooling measures coincide with market softening and expected oversupply in the next two years. No one likes the feeling of being left holding the hot potato when the music stops. Over-stocked developers and desperate sellers are most likely to be the parties who trigger the domino effect in a market correction.
4. Investors are waiting for meaningful hints to enter market again.
National Development Minister Khaw Boon Wan mentioned that there is still room for prices to moderate. The worse the market sentiment, the more often the sellers tell the media that “market shows signs of recovery”, “prices will pick up next year”, “market has reached bottom”, etc. The contradicting comments are confusing investors who are holding their horses.
5. More owners will end up with a meaningless investment.
With the impact of falling rental demand starts to surface, more landlords are feeling the pain of their already very humble return of under 3 percent. It is meaningless to hold onto an investment that can’t generate a positive return.
Owners are also under the constant threats from continuing softening of the market, the possible hike in interest rates, and the unexpected onset of another recession. Those with little holding power are just hoping to survive a meaningful correction with their meaningless investment.
 This article was first published at

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