Thursday, 28 September 2023

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Right to impose cooling measures on the property sector no matter what billionaire developers may say

When Singapore announced tweaks to increase the amount of stamp duty that property buyers have to pay, this news was met with a strong storm of criticism by developers. I suppose there is no surprise there. Developers make their money from the sale of properties so where they are concerned, the more the merrier. From the government’s perspective however, it completely makes sense to increase the stamp duty. If you go back to basics, housing is a fundamental need. You buy a property because you need a secure place in which to live, call your own and build a life from.

Profiting from owning and renting out multiple properties or speculative buying and selling to make a quick buck is very much a secondary development. So, if the basic need of enough Singaporeans are not met, the government absolutely needs to regulate the situation and even the playing field. With reports of stagnant wages and rising property prices, it is, of course, prudent for the government to take preemptive measures to prevent the market from overheating.

Billionaire developer Quek Leng Beng has subtly criticised the government’s cooling measures. Notably, he requested that the government cut the hefty duties placed on foreigners. Does criticism from a man whose empire would stand to gain the most from a tax cut have any weight? I mean no disrespect but how does a tax cut for foreigners benefit the rest of Singapore? Will higher turnover benefit the majority of Singaporeans or will it only benefit those who have the spare cash to buy more than one property while making it harder for the middle classes to move up the property rung. One may argue that increased property sales will create jobs. But if you look at it carefully, does it really create jobs? The bulk of the jobs will be in the actual building of the buildings which will be largely done by foreign labour. When you look at things from this perspective, the biggest benefits will be reaped by the fat cat developers. There is nothing wrong with making money but there has to be a balance and in this regard, I believe the government called it correctly.

There have been reports on how scion of the Quek family, Sherman Quek will not be able to turn as large a profit as his dad due to the cooling measures. Further, it has been observed that the decline in net immigration in Singapore will lead to the shrinking of the labour force. This will in turn result in a decline of GDP which would in the words of Ravi Menon be hard to “imagine a dynamic global city “growing at less than 2 percent, or worse still, 1.5 percent.”

The thing about GDP is that it only takes into account production. Could our GDP figures have been rosy in large part because of the large number of low wage foreign labourers building apartments for the rich to invest and speculate with?

As correctly pointed out by Bloomberg: “Singapore has to be honest about the choice facing its people: They can either have ever-growing housing wealth or fewer foreigners. Heading into a demographic cul-de-sac with revved-up property prices would be a repeat of Japan’s 1980s misstep.” In this instance, the Singapore government is correct in its cooling measures no matter what self-serving developers may say.

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