Should Singaporeans be grateful for property cooling measures?

By Property Soul

Singapore’s Second Minister for Finance Lawrence Wong said in a Bloomberg TV interview that the government has not “made any movement in the budget” to relax property cooling measures because “demand remains very resilient” and “property volume in terms of transactions has increased and not decreased”.

Sacrificing housing affordability for foreign investment

Singapore private property prices have fallen only 3 percent in 2016 and a total of 11.2 percent from the last peak in the third quarter of 2013, after a surge of 92 percent since the bottom of 2003.

Comparatively, home prices in Hong Kong have risen more than 150 percent since 2009 and 370 percent from the SARS period in 2003.

According to a recent study by Oxford Economics, Hong Kong has the most unaffordable housing in the world, followed by Mumbai, Beijing, Shanghai and London. Singapore is in seventh place after Tokyo.

600x-1With strict criteria and a long waiting time of over eight years for public housing, Hong Kong residents are forced to seek out private properties.

However, only those who earn a monthly income of at least HK$40,000 to HK$50,000 (S$7,000 to S$9,000) can afford to buy a private home. A median income family would need 35 years of annual income (and without even spending any of that income) to pay for a 970 sq ft property. The duration is 30 years for Mumbai, Beijing and Shanghai.

Chinese buyers have long been blamed for pushing up property prices in Hong Kong. CNBC recently published an article, “Hong Kong and Singapore property: One is winning on Chinese investors” (CNBC, 17 February 2017)

Evidently, investors from China are more interested in Hong Kong properties than those in Singapore. Last year, Chinese buyers invested $5.2 billion in Hong Kong’s real estate market, compared to just $600 million in Singapore, according to figures from Real Capital Analytics.

“In Hong Kong, Chinese developers and financial institutions have mainly purchased office property, while individual investors have mainly purchased residential property,” commented the Asia Pacific CEO of Colliers International.

Fortunately, since the Singapore government imposed a 15 percent Additional Buyer Stamp Duty (ABSD) on foreign buyers, foreigners who had bought homes in the city fringe amounted to only 5.5 percent for the fourth quarter of last year, down significantly from 17.5 percent before the ABSD was introduced.

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Widened wealth gap amid rising property prices

A 2014 study done by the NUS Department of Economics (“Income inequality in Singapore: Do housing prices play a role?”) tried to determine if there was any link between income inequality and housing prices. The results showed a small but statistically significant effect of rising private residential property prices on labour income.

There are social implications when property prices are going through the roof. Those who sit on properties that were acquired when they were still cheap are understandably laughing all the way to the bank. On the other hand, those late to the game face increasingly unaffordable housing.

High property prices widen the wealth gap between the haves and the have-nots.

The ‘haves’ can leverage increased property prices to upgrade their homes or to acquire more properties. Meanwhile, the ‘have-nots’ find themselves unable to even afford a roof over their heads.

There is a scene in a Hong Kong TV drama about a couple saving to buy their first matrimonial home. One day the man happily shares the good news with his fiancée.

“Guess what I did today? I just put down the deposit on our new home. Our dream has finally come true after all these years. Remember I told you about my schoolmate who works in a bank? He’ll help us get very good terms for the 35-year loan.”

“I’m afraid that I can’t be the co-owner of the new flat,” the fiancée interrupts him. “In fact, I have to marry another guy. My fiancé has just bought a seaside house for us.”

She continues, “I’m sorry for my change of heart. I am getting tired of this kind of life. For years we hardly eat out. We can only meet at places that don’t cost anything. We never go on holidays. And I can’t go shopping to avoid spending money unnecessarily—all for the sake of saving every cent for the downpayment of the most affordable flat.”

“Yet housing prices are climbing much faster than the rate we save, and whatever increment we get in our salary. We have no choice but to save even harder. Yet I still feel that the more and the longer we save, the more unreachable our goal becomes…”

“By the way, the new house doesn’t come with a mortgage. He paid up in cash.”

Shouldn’t we be grateful that the Singapore government has cooling measures in place to keep private home prices in check? And for those who can’t afford private properties, aren’t we lucky to have HDB flats at different price levels to make them more widely affordable to buyers?

Buying a home first or getting married first?

In Singapore, more couples are delaying tying the knot to save up for the high cost of a wedding, a new home, and having children. And young adults also need time to build their careers and be financially stable before settling down.

Three years ago, the then National Development Minister Khaw Boon Wan told the media that the mentality of the new generation had changed. The priority was to buy a home first, and then get married and start a family.

In an interview on marriage and parenthood last October, Senior Minister of State Josephine Teo urged young people to look for love and settle down early. She also warned women to have babies early to avoid infertility problems they might face if they held it off till too late.

In Hong Kong, more than 70 percent of people feel that they should buy a home first before getting married. Over 60 percent of women placed buying their own flat as a first priority over marriage.

Recently, a Hong Kong TV show “The Place We Call Home” (有楼万事足) interviewed individuals to see how far they would go in order to buy their own home. But we all know how these reality TV shows like to exaggerate things to attract viewers.

An attractive 22-year-old girl put down “has his own property” as a must-have in looking for her future husband. She said men shouldn’t ‘fish in muddled water’ if they don’t own any property.

Her dream home was a 2,000 sq ft apartment in a prestigious district. The reason? Women can only have a sense of security if a property were theirs. According to her, women have to feel safe and comfortable before they can come and conceive, naturally.

Perhaps someone should go tell Mrs Teo that millennial women are looking for much more than just “a very small space to have sex” for reproduction?

This article was first published on Property Soul website.