I read with bewilderment the article from Singapore Property Review titled “An inconvenient truth: Property curbs may never be lifted, analysts warn”.
“The report argued that unless property prices plunge suddenly and dramatically, buying curbs may not be lifted in order to substantially reduce Singapore’s unhealthy fixation with real estate.”
This remark from the Maybank Kim Eng property report leaves me scratching my head. While I try to digest what it really means, I notice that there are some important points that the analyst may have missed in the arguments.
There are at least four things that I hold a different view from what the brokerage firm says.
1. No one can influence the Singapore government’s housing decisions.
The efforts of industry stakeholders and market analysts to predict or speculate whether and when the government will lift the property cooling measures have proved in vain time and again. And now, someone is trying to make a wild guess that “what if buying curbs become permanent”.
Frankly, I don’t think the report has “posed a previously unthinkable question”. It sounds more like making an unfounded hypothesis on the market situation.
The ministers and relevant authorities have repeated at least nine times from February 2014 to April 2016 that they won’t be relaxing any property buying restrictions, unless prices have corrected to a meaningful level. It never says anything like property curbs are here to stay, permanently.
Isn’t the government clear enough on its policies regarding cooling measures? Why some people still don’t get it?
It is not “Property curbs may never be lifted”. It is “Whether property curbs will be lifted may never be influenced by any party”.
Please stop unfruitful second-guessing what the government is planning. When in doubt, ask the government.
2. It’s dangerous betting on cooling measures to attract property buyers.
A developer told the media that the government will be smart to know that it’s time we lifted property curbs in Singapore. In other words, get ready to buy soon.
The media said that Additional Buyer Stamp Duties (ABSD) and Total Debt Servicing Ratio (TDSR) are very likely to be relaxed after the government loosens car financing. So it’s time to buy again.
Now the property agent may probably say that they know the government will never change the buyer and seller stamp duties. We can’t avoid paying 7 to 15 percent more ABSD whether we choose to buy it now or later. So no need to wait. Just get used to it. Take it as a fact of life and buy now.
We helpless buyers in the market are bombarded with messages from the media advising us to load it, cock it, aim and shoot. Then get ready to load, aim and shoot again.
Do they know that most of us have limited bullets? What if the market doesn’t recover after we have shot all our bullets? Is the advice from the industry players bullet-proof? Who are going to save us if we get shot?
In less than a week after the British voted for Brexit, UOB suspended overseas loans for London properties. A year ago we were invited to a high-class restaurant for an UOB overseas property investment seminar where a UK conveyancing lawyer talked about the attractiveness of investing in London properties.
Banks lend us the most when we need them the least. The reverse is also true. Remember what the main character said in Hanzawa Naoki (半沢直樹), a 2013 Japanese television drama?
“Banks will lend you umbrellas on a sunny day, but they will take them back when it is pouring.”
It is not uncommon for banks to tighten financing and ask borrowers to repay housing debts when they perceive a forthcoming crisis. Lesson learned: Make sure you have a Plan B before you fire.
3. Property investment is not economically non-productive. Property speculation is.
This is the argument that I disagree with in the report:
“Singapore households have SGD840b of capital or 209% of GDP tied up in residential property. This has resulted in lower disposable income which has impeded consumer spending and muzzled entrepreneurship. Another less obvious implication of property ‘overinvestment’ is that home-price appreciation fuels wage inflation, reducing Singapore’s cost competitiveness.”
It is true that Singapore has an unusually high home ownership rate of 90.8 percent among residents. Thanks to the Housing Development Board which provides affordable public housing for over 80 percent of Singapore’s resident population.
If most households are paying their housing loans with their CPF money for their highly-subsidized flats (rather than using hard cash to pay market rate for rent or mortgage), it is wrong and unfair to say that this “has impeded consumer spending” and “fuels wage inflation”.
The report also blames Singapore households for sitting on a cash pile of S$374b which the analyst assumes is set aside for to buy investment properties when prices are right, thus making the idle capital “economically non-productive”.
Asians, especially Chinese, are well known for their virtue of saving rather than spending. But that doesn’t mean that the S$374b will all be spent on properties. What’s wrong with saving money for a rainy day?
“Singaporeans need to be weaned from their age-old aspirations of being landlords earning passive rental income. Investors also need to shed their deeply entrenched belief that investment properties are the best asset class to hold.”
There is nothing wrong with buying the right property at the right time and at the right price, either for passive income or for long-term appreciation. The only problem is buying any property in any market at any price, hoping that prices will go up in the near future. The latter is called property speculation rather than property investment. Only too much speculation in properties is “economically non-productive”.
All investments carry risk. But that doesn’t mean that we should avoid it altogether. We don’t have to give up on love just because there is a chance of heartbreak or divorce. Instead we should learn as soon as possible and as much as possible how to avoid failures. And we spend a lifetime continue to practice what we learn in order to be successful.
4. Entrepreneurship is not less risky than property investment.
The Maybank Kim Eng report advises the government not to remove the cooling measures for the sake of Singapore’s long-term survival.
“If part of the monies that has been locked away in anticipation of a bottoming of the property cycle flows towards productive assets or even consumption, we believe entrepreneurship can be enhanced and thrive.”
Is Singapore’s traditional culture or our education system encouraging entrepreneurship? Are Singapore’s cost of living, banking practices, foreign labor policy, etc. favorable for SMEs? What will happen if one day we tell our parents or our partners that we are going to give up our stable job and our HDB flat to be an entrepreneur?
Last month Switzerland had a vote on an unconditional basic monthly income of 2,500 Swiss francs (S$3,460) for every adult, so that everybody can now pursue what they really want to do in life rather than being confined by the salary of a stable job.
The success of Singapore’s economy is based on the provision of a skilled workforce to attract foreign investment from over 3,000 multinational corporations. Can you imagine Singaporeans quitting their jobs in droves to follow the “Swiss dream”?
Who just said property cooling measures may never be lifted?
This article was first published on Propertysoul.com