Re: Govt Setting The Stage For New Property Boom In Singapore?

[Kennethkohsg]

Re: Singapore Govt Setting The Stage For New Property Boom In Singapore?

Dear All,

1. As outside observers, I like to hear your objective views regarding the Singapore Govt's policy change on the property investing related policies announced yesterday. These include:

a. reducing the downpayment deposit from 20% to 10%.

b. reducing 10% cash deposit to 5% cash deposit requirement.

c. allowing the bank to increase their housing loan upto 90% of the
of the purchase price or their bank valuation price whichever is
lower.

d. Allow CPF monies (equivalent to the Superannuation Funds in Australia) to be used to buy private properties with shorter lease terms period of 30-59 years.

e. allowing non-related singles to use their CPF to buy private properties. This is a new policy and further liberalises the use of the CPF funds.

f. Allowing foreigners to buy non-condonimium developments of lower than six storeys without having to seek Govt's prior approval. Previously, foreigners can only allowed to buy private flats in buildings taller than 6 storey high.

g. Allowing foreigners with a minimum S$2 million investments in Singapore including upto 50% funds through property purchase, to become eligible for Singapore Permanent Residency. Previously, they can only be considered for Singapore PRship only if they invest in new business or funds focused on the economic development of Singapore.

h. Allowing CPF monies in excess of the Minimum Sum amount to be used to buy second and subsequent properties in Singapore.

2. It is also reported that "developers in Singapore must NOW get Govt's approval before buying residental land for development. Residential developments will also have to be built within 6 years to ensure that developers do not hoard land supply or purchase it for speculation."

3. It is further reported that CPF funds can no longer be used to invest in
"Non-Residential" commerical properties in Singapore.

4. Mr Mah Bow Tan, Singapore Minister for National Development has openly
and categorically declared and re-iterated again both in the Singapore Parliament and to the press that these policies are not aimed at simulating the Singapore property market.


5. Thus, specifically, I will like to hear your views on the following areas:

a. your analysis as to the true intentions of the Singapore Govt
behind such a drastic move... Or all these simply "window dressing" measures by the Singapore Govt to create positive ground feelings in preparations the next impending general elections, which is likely to be announced soon in the offing, as suggested by some local Singaporeans?

b. the rationale and truth behind Mr Mah Bow Tan's ministerial statement i.e. what he is actually saying and not saying openly in his public statements.

c. your analysis on the likely impact on the Singapore property market both the immediate short, medium and long term effects.
(I have no doubt that these recent policy changes will in the short term change the Singapore property investors' sentiments for the better. However will it further translate itself effectively into new housing price boom soon?.. And will the new housing boom be sustainable?) This is in view of the fact that from my own personal HDB flat sale experience, the Singapore property prices have previously grown " UNREALISTICALLY" at an average rate of 40%p.a. from 1987 to 1996. This is especially so during the 1993-1996 period when property prices surges uncontrollably high by more than 30%p.a after the Singapore Govt first introduced its asset enhancement programmes in 1993. By late 1996, the same Singapore Govt was forced to introduce some dratic measures including a new capital gains tax to forcibly curb the high property prices from further spiralling upwards uncontrollably until the Asian Financial Crisis officially set in July 1997.

d. your view on whether property prices in Singapore is still realistic and comparable to other international cities round the world including the various Australian capital cities or comparatively speaking, is it presently deemed "highly undervalued", neccessitating these recent moves by the Singapore Govt.

e. Any special significance regarding the timing for these "sudden" changes
in the Singapore Govt's policy changes?


6. I look forward to your kind sharing and active participation especially so from the more experienced members and those with the economist or/and public governance background so that we can all learn from our echange of views and sharing of experiences to independantly conclude for ourselves if this is indeed a good opportunity for us to promptly consider investing in Singapore properties in the immediate future.

7. Thank you.

regards,
Kenneth KOH

 

[WillG]

Hi Kenneth Koh,

I am afraid I am not qualifed and don't have the experience you probably have to analyse the proposed policies you mentioned in your thread however am interested in how Singapore property markets work. Can you highlight some similarities & differences between the Aus property market such as land tax, rates, type of buildings, government controls etc ...

Cheers

 

[Kennethkohsg]

Dear WillG,

1. To me, the way the Singapore property market works, is fundamentally a very different one from that in Australia. It is a highly "Govt-regulated" property market within a context of a highly land scare Singapore, rather than one which is based on the free play of market supply and demand forces and a land-abundance Australia.

2. While the Australian property market is now "highly sensitive" to the local interest rate movement and regular 10 years property cycle trends, the Singapore property market is said to be highly regulated with "artificial housing price ceilings and floors", set/determined by the Singapore Govt, to the extent sometimes, it is totally irrespective of the prevailing general market trends. For example, we are presently having a big oversupply of private condo housing since 1998, however the price of the private condo price do not really fall because logically speaking, it simply "has to be higher" than the HDB flat's resale price which is set by Singapore Govt indirectly, being a "private" flat as compared to a similar "govt/public-funded HDB" flat, all things being equal.

3. The land supply and its (land) prices in Singapore are also highly regulated and controlled by the Govt, rather than based on the free interplay of housing supply and demand market forces.

4. Thus, know exactly the Singapore Govt's actual real intentions behind their public policy changes is essential and critical to understandig how (the Singapore Govt will want) the Singapore property market is likely to move accordingly in the near future.

5. From my own personal past investing and HDB flat ownership experience, the price of our previous HDB flat hardly move during 1987 till 1992. It was not until the Singapore Govt implemented its Asset Enhancement Programme that our same HDB flat could suddenly rise up from its previous purchase price of S$100,000 to S$540,000 between a short 3 years period from 1993 to 1996, averaging a high 40%p.a. growth from 1987 to 1996, before we finally sold it off in Feb 1997, to cash out on its profits. You may want to think that this is actually similar to your property cycle play in Australia. As a Singaporean, it may "look convincingly" like one, to the outside observers but it is definitely not so, as I can truly tell you as one who is from the inside, having invested in your Australian property market myself.

6. I find it easier to understand and invest profitably into your Australian property market despite being an overseas investor;- rather than to understand/invest in our own Singapore property market, despite having been living here locally for the past 40 odd years.

7. Having said this, I must say what your views as outside observers are important to me, as this is exactly what the Singapore Govt want the rest of the world to see Singapore as you see us now, from the outside so that we will know further tinkling of the govt policy is further required or not.

8. For your kind update, please.

9. Thank you.

regards,
Kenneth KOH

 

[Baloo]

With the Singapore market being relatively flat over the last few years, and with interest rates for loans at about 1.75%, I think the losening of the regulations would have a positive impact on the property market.

Allowing foreigners a wider selection of property to by will definitely entice more cashed up expats living in Singapore to delve into the market, be it as a PPOR or investment. Many are now paying $5k+ in rent which could easily go towards paying off a hefty mortgage. I'm not sure if the minimum 20% deposit for foreiners has been lifted though. That could be a stumbling block on the higher ends properties.

I think the key change is the retraction of equity type investments using CPF funds. While people can still buy approved managed funds, I think many will start looking at property as a viable alternative.

There are CF+ places still available in Singapore but they are getting rarer by the minute but it's still an opportunity today. I'm not aware of too many people who buy to renovate and onsell quickly but I'm sure this is also something people will catch onto.

All in all, I think the changes made yesterday might be the start of a rise in the Singapore property market. I don't think it will be explosive initially as there are many landlords around who bought high in the late 90's and are in negative equity, but I think once the media (state controlled) start reporting on property increases, more people will start to take notice.

 

[Kennethkohsg]

Dear All,

1. See this headline, "MPs say policy changes to property market aimed at boosting sector." Please see the link, http://sg.news.yahoo.com/050720/5/singapore158688.html

2. As an outside observer, who do you choose to believe as to the real purposes for the recent policy chenges in Singapore? Mr Mah Bow Tan, the Singapore Minister for National Development or the Members of Parliaments(MPs) in Singapore?

3. Interestingly, isn't it that in Singapore, the MPs and a Govt Minister have different interpretations of the actual aims for the policy changes, even though they may attending the same Parliamentary session where the same policy changes were being legislated and announced to the general public....That as important public officials, where public trust is sacrosanct, both the elected MPs and their appointed Minister are also prepared to crack such a game publicly, as so to have their personal credibility and integrity openly tested in this manner;- i.e. as to who is actually telling the truth to the general public in Singapore, as the events eventually unfold out in due course.

4. The Singapore stock market, especially most of the property counters have shot up by more than 15% since last afternoon.

5. Rumours is now abuzz in the stock market that Singapore is actually preparing for the next General Elections soon, even though no such announcement has ben made or even hinted. Thus, we may not actually see a real fundamental change in the property market situation in Singapore, as the policy changes may actually be aimed at creating the "feeling good" effects on the ground to prepare the general public to continue to vote for the existing PAP Govt, should the next General Election be held at the end of this year/early next year.

6. More updates will be given as the event unfold itself in Singapore.

7. Thank you.

regards,
Kenneth KOH

 

[Baloo]

Kenneth,

Why should PAP need to buy votes ? In the last election there weren't enough opposition candidates to threaten the Govt. PAP won, as it always does, before a single ballot was cast.

 

[Kennethkohsg]

Dear Baloo,

1. In Singapore, we do not "buy" vote. We only "re-draw the electoral boundaries" to ensure that the ruling PAP party has the best chance of succeeding in holding onto their ruling powers for each impending General Elections. I guess that you will have probably heard about the Group Representation Constituency (GRC) concept in Singapore.

2. Where possible, potential able opposition candidates will also be co-opted into the PAP Ruling Party to ensure its election success. Alternatively, other govt critics will also be co-opted to serve as non-elected Nominated MPs to participate in the Parliamentary debates. It is assumed that Singapore can only afford one single National Party to rule the island and this is most cost-efficient use of talents in Singapore. Having credible opposition for the sake of opposition, is deemed to be wasteful of national resources and efforts.

3. Singapore is a Democratic-Socialist country. Thus, we are not truly Democratic in a certain sense. Though we have an general election every 5 years, we have no real opposition to freely exercise our political choice in the exercise of our electoral votes. Despite the regular General Elections heald every 4-5 years, do not be surprised if some adult Singaporeans tell you that they may not have actually exercised his voting right once at all as there is always a walkover victory for his Constitency at the General Elections. Nor do we have the true freedom of free speech and beliefs, real voting rights and personal rights to full privacy that I was taught to have in a truly democratic country, as a small boy, living in Singapore. Our concept of "Equality" as stated in our National Pledge, has become one of "Equal Opportunity", rather than in the true sense of the word, called "equality" in the literal sense.

4. For your kind update,please.

5. Thank you.

regards,
Kenneth KOH

 

[Baloo]

yes, I'm aware of how the voting system works in Singapore. That's why I was questioning your assumption that the changes made yesterday were in order to help PAPs election results.

5. Rumours is now abuzz in the stock market that Singapore is actually preparing for the next General Elections soon, even though no such announcement has ben made or even hinted. Thus, we may not actually see a real fundamental change in the property market situation in Singapore, as the policy changes may actually be aimed at creating the "feeling good" effects on the ground to prepare the general public to continue to vote for the existing PAP Govt, should the next General Election be held at the end of this year/early next year.

 

[Kennethkohsg]

yes, I'm aware of how the voting system works in Singapore. That's why I was questioning your assumption that the changes made yesterday were in order to help PAPs election results.

**************************************************8
Dear Baloo,

1. Who do you choose to believe as is actually telling the truth to the Singapore public? The Singapore Minister for National Development or the MPs?

2. Despite the Singapore Minister's categorical "denial" as to the actual intentions behind the policy changes, the Singapore stock market have reacted immediately last afternoon after its announcement so much so that one of the MPs, Dr Wang Kai Yuen, has to express his concerns about rising property prices to the same Minister during a 20 minutes break in the Parliamentary session.

3. I can agree with you as to your present assessment of the Singapore property market. However, don't you "feel uneasy" when the Singapore Minister for National Development keep telling you otherwise publicly, as to the actual intentions for the policy changes. Does the Singapore Minister truly not know how you and the Singapore public will think naturally, as to the obvious logical consequences of the policy changes that he is implementing?

4. May I humbly suggest to you that you gave our Minister more credit for his public statement and for knowingly and willingly make his statement as such. Personally, I read him as trying to indirectly suggest to his readers, to "read in between the lines" regarding his public statement, rather than to take things at face value superficially.

5. As in the past General Elections in Singapore, "sweetening the ground" in preparations for the General Elections, has been a practice before. It will continue to be practised in the next General Elections. Such things are actually quite common around the world if we were to look at the recent Federal and State Elections process in Australia and in America.

6. For your kind update,please.

7. Thank you.

regards,
Kenneth KOH

 

[Baloo]

Being used to reading conflicting views regarding propertry markets all over the world, I would have been more surprised if there was no contrarian view to the Singapore changes.

What the minister says is inline with common sense "only buy what you can afford". Pretty much what Greenspan and MacFarlane have been saying all along.

I prefer to concentrate on the changes that have put in place and what impact that may have on the market. So far I see it as a positive change.

Also, I have no doubt that if these changes trigger an uncontrolable property broom, like the mid 90s, the governement will reverse the changes and possibly add more restrictions in an attempt to control the market. With that in mind, there may only be a small window of opportunity to use these changes to your advantage.

 

[Freeatlast]

Kenneth,

At the end of the day, the Singapore market is too small, too heavily regulated, and, lets be honest here, the government can "manipulate" the market any way it wants......

This latest move is another grab by the govt at bringing a "dead fish" back to life......

Cheers

 

[Kennethkohsg]

Dear Baloo,

1. I agree with you. I think that you are probably right that a short time-limited small window of opportunity exist now to invest profitably in the Singapore property market.

2. That is why if we can correctly pin-down the Govt's actual intentions for implementing these policy changes, we will better understand the property investing environment in Singapore and its required game rules to play by with.

3. We will probably have to adopt the quick speculative buy-low-sell-high-at market peak" property trading technique to profit from the Singapore property market in the immediate future if we dare to take the risk at this point in time when things are still not so clear to date.

4. The traditionally advocated "Buy-Hold-Never Sell" property investing strategy in Australia, will not worked well in the Singapore property market. In fact, I see it as a highly risky strategy to apply in this context.

5. The last time when this window of opportunity first appear was in mid 1993 when the Singapore Govt introduced its Assets Enhancement Programme. Within 3 years, the Singapore Govt is already reversing its polices to curb the property speculation in the market with a slew of desperate measure beforre the market officially cool down, together with the occurrence of the Asian Financial Crisis in July 1997. Since the, the property prices in Singapore has dropped to about 40% in 2004/2005 from its market peak in 1996. Today, it is still reported to be still about 35% below its last market peak in 1996. Thus, there is still much scope to profit from this small limited window of opportunity if one dares to take a plunge and risk investing into the Singapore property market early at this point in time.

5. Timing-wise, I think that it is NOW almost the "right time" that the Singapore property market start to recover as in the past, as desired by the Singapore Govt, and when it does reach its (desired) market peak around 2008/2009, it be almost time again for us to start considering investing into the Australian property market for its next property cycle upward recovery trends again.

6. For your kind update, please.

7. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Kenneth,

At the end of the day, the Singapore market is too small, too heavily regulated, and, lets be honest here, the government can "manipulate" the market any way it wants......

This latest move is another grab by the govt at bringing a "dead fish" back to life......

Cheers

*************************************
Dear Freeatlast,

1. I can agree with your line of thinking. That is why I also find it personally "stressful" and "risky" to invest profitably into the Singapore property market, as I have to constantly "out-guess"/"out-move" my own Singapore Govt's real intended actions" on a real time basis, prior to its next policy changes.

2. Despite this, the returns can be really rewarding at an average equivalent of about 40%p.a if you can correctly enters and exit the property market properly with a property trade.

3. So why not, for those who are good in such "speculative" property trading game and can stomach its fast-moving and fast-changing rules real time, as per considerations for investing into the Australian share market for the higher returns.

4. Thanks.

regards,
Kenneth KOH

 

[Freeatlast]

Kenneth,

Returns may be good if you are "in the know" with some of the government people..... Otherwise, I prefer not to participate in what is a "rigged" market.

As you will know too well, many Singaporeans are sitting on houses that are negative equity, in a market where rents are still weak.....

I prefer a free market... Don't get me wrong, hopefully one day Singapore will be that way too.... but with 80+ % of the population living in govt subsidised housing, it may take some time....

Cheers

 

[Kennethkohsg]

Dear Freeatlast,

1. I respect your sentiments about the Singapore property market.

2. To be totally on the safe side, I will prefer not to play in the Singapore property market myself despite being a local, though I must admit that the potential gains can be quite attractive.

3. Neither will I want to encourage you if you think the risks are not worthwhile for you to invest with sufficient SANF. Nonetheless, I shall leave it to decide things for yourself.

4. As for me, honestly speaking, I am still contemplating about my own decision as I am thinking of ways to further minimise the risks involved by doing my own due diligence more thoroughly and by thinking through the various likely scenarios and probable outcomes and how I am further seek to mitigate/minimise the risks involved so as to make the investing profitable and "safe" for myself.

5. It is really quite tempting to invest though I will not highly recommended it as it will only involve a rather short term speculative property trading play. We can still enter the market at an early stage at this point in time and likley to be profitable in our investments if we can plan to exit from the market investments properly.

6. For your kind update, please.

7. Thank you.

regards,
Kenneth KOH

 

[agent007]

Kenneth KOH

In today’s local paper (SIN) – The Straits Times (http://straitstimes.asia1.com.sg/), there was a front page article in regard to the new reforms. Some points I still remember are:

1/ Property is still about 35% below the peak it reached back in 1996 when the property boom finished.

2/ Property boom started in the mid 80s after government changed legislation

3/ Property boom finished due to:

3.1/ Government policy changes (the main change revolved around CG)
3.2/ 1997 Asian economic crisis

4/ The main reason for policy change have being the fact that property prices don’t reflect the reality of SIN economy. In between the lines I think I also read that government needs or want to give some incentive to the banking sector and stimulate growth.

5/ They also reckon that property prices will have some moderate growth at the beginning…

What I get from the article is:

1/ The economy is totally controlled by the government as oppose to the market – No good!.

2/ We still have a long way to go in AUS.

Cheers,

James.

 

[Kennethkohsg]

Dear All,

For the original speech by Mr Mah Bow Tan, the Singapore Minsister of National Development regarding the "Re-tuning (Singapore) Property Policies" , please see this link at http://www.somersoft.com/forums/showthread.php?t=21490&page=2.

For your kind update,please.

Thank you.


regards,
Kenneth KOH

 

[Kennethkohsg]

Dear All,

Attached below, please see the update on the reactions to the "Re-tuning (Singapore) Property Policies" by the Singapore Govt;-

"Property Package Gets Thumbs Up"
http://business-times.asia1.com.sg/sub/news/story/0,4574,163099,00.html?

Key Feedback Points:

"Looking at the past, each time there have been changes in policy on financing of property, it has had a direct impact on demand and consequently property prices,' said DTZ Debenham Tie Leung executive director Ong Choon Fah. 'We should see more visitors to showflats and more people willing to commit. Prices should go up when demand picks up sufficiently.'

Knight Frank executive director Peter Ow predicts a 10 per cent increase in private home sales for the whole of this year and a price increase of at least 5 per cent for the next six months. Many developers are hoping the increase will be much more."

For your kind update,please

Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Dear All,

For other positive feedback on "Re-tuning (Singapore) Property Policies" by the Singapore Govt, please see other reports entitled,

"Easier now to buy your own property
Buyers of property will need to fork out less cash; market welcomes move "

at http://straitstimes.asia1.com.sg/free/story/0,6418,329537,00.html?

Key Feedback Points include"

".... foresee a boost for the struggling property market. The stock market shot up after the announcement and property counters like City Developments rose 75 cents to reach $8.85."

"Also, prices of five-room and bigger flats - now in poor demand owing to the bigger cash outlay - will perk up."

"Most of these bigger flats are selling below valuation. Now, more may be sold at valuation,' said PropNex chief executive Mohamed Ismail. "

"Billionaire Kwek Leng Beng, who is executive chairman of City Developments said: 'The Government has sown the seeds of growth to propel us to the next level."

"But some MPs are urging caution. They include Dr Amy Khor (Hong Kah GRC), Ms Irene Ng (Tampines GRC) and Dr Ahmad Magad (Pasir Ris-Ponggol GRC)....
Fearing an upsurge in property prices, Dr Khor said: 'Some of these changes seem to me to be a reversal of the government's policy to ensure prudence in property investment."



For your kind update,please.

Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Confidence Matters More Than New (Property) Policy (in Singapore)

By WONG WEI KONG
Singapore Business Times Newspapers
20th July 2005

JUDGING by the stockmarket reaction yesterday, many expect the latest policy changes relating to the property market to drive up demand for private homes and push prices higher.

But don't bet too much on that happening.

The policy changes in themselves are notable.

The government will allow private property buyers to borrow up to 90 per cent of the total purchase price instead of the previous 80 per cent. Of the 10 per cent downpayment, they need pay cash for only 5 per cent and can use CPF savings for the rest.

Among other key changes, home buyers will be able to use CPF funds to buy private properties with shorter leases of 30 to 60 years; non-related singles will be allowed to use their CPF savings to jointly purchase private property; and foreigners will be able to buy apartments in buildings with less than six floors without prior approval.

But while these are significant changes, it is important to appreciate the context in which they are taking place.

It's worth noting that the bank lending limit was first introduced in 1996, just before the Asian financial crisis, as part of measures to cool the overheated property market at that time.

By relaxing the lending limit nine years later, the government is indicating that there is little danger of a property bubble forming again, that speculation is no longer a major concern and that demand for property is unlikely to be excessive.

It is a tempered, long-term assessment of the Singapore property market in which increases in home prices - if they happen - will more likely be gradual than sharp.


Changed Psyche

It's an assessment that is tied to new economic realities. The property boom in the 1990s was against the backdrop of strong economic growth and full employment.

Today, moderate growth of 4-5 per cent is considered good news, unemployment and job security have become major issues, and economic cycles have grown much shorter.

Has all this changed the psyche of home buyers? Based on the evidence provided by the slow recovery of property prices so far and the large stock of unsold homes, the answer has to be 'yes'.

Singaporeans have become much more cautious when buying property.

Will this change drastically even if buyers can now borrow more and put down less cash? Unlikely.

There is also the question of negative equity affecting those who bought when property prices were much higher. Rising home prices may help address this problem, but it is by no means certain that property values will increase by such a margin.

While the relaxed lending rules are seen drawing out 'marginal' buyers who previously wouldn't be in the market for private property, much will depend on how the banks react.

And while banks may lend more, to what extent will they do so and at what price?

The policy changes reflect the shift towards risk-based capital management within the financial sector in recent years.

Banks will be able to lend up to 90 per cent of a property's value but to compensate for the increased risk they will be required to hold more capital against loans that exceed 80 per cent of the property value.

They are also expected - by the Monetary Authority of Singapore - to 'apply rigorous internal credit evaluation criteria' before extending such loans.

The added cost of capital, the higher risks, the pricing of these loans and the competition among banks will all be factors that will determine the response - of banks and buyers - to the relaxation of lending limits.

The relationship between the promise of easier access to funds and the demand for property is not as straightforward as it may seem.

Property stocks soared to multi-year highs yesterday and the property index jumped 8.4 per cent to its highest level in more than five years.

The market may well end up disappointed. The policy changes may not - nor were they designed to - give the property market the big boost that many are hoping for.

To be sure, some segments, like the 99-year leasehold sector, may benefit.

But ultimately, it still boils down to consumer confidence. And that takes more than just easier financing to fix.