SINGAPORE (June 3): Almost a year after intervening to stem soaring property prices, Singapore has done what it set out to do and stabilised the property cycle, Minister for National Development Lawrence Wong said.
“The property market last year, before the cooling measures were put in place, we saw prices rising very sharply,” Wong, who is also second finance minister, said in an interview with Bloomberg Television on May 30.
“There was a very real risk that prices would outpace fundamentals, and I think if that had happened then eventually it would lead to a destabilising correction and I think everybody would be worse off.”
Singapore’s government introduced cooling measures to slow price increases in July 2018, including raising stamp duties for second homes and entities and tightening loan-to-value limits for housing loans granted by financial institutions. Home prices fell for a second straight quarter in the three months ended March 31, with luxury home values, or the cost of residences located in prime areas, down 2.9%, the most since the quarter ended June 2009.
“It was, as we had stressed then, not to bring down prices but to stabilise and moderate the cycle, and I think we have achieved that effect,” Wong said.
Asked if he was concerned about property buyers shifting focus from Hong Kong’s ever-upward property market to cheaper Singapore, Wong said there will always be foreign investors looking to buy because they think it is a good investment.
However, he said Singapore will continue to monitor prices and has a suite of available tools at its disposal to ensure stability.
“We welcome investors to our property market, but what we want to ensure is that demand, whether local or foreign, doesn’t cause the prices to move at a pace that outstrips fundamentals.”
Wong said “genuine homeowners” would understand. “A speculator may not be happy, because they would like to go in when the price is low and exit when the price is high and flip. But we don’t want to be a nation of property speculators. We want to be a nation of homeowners.”
Singapore also has sufficient liquidity in its financial system to sustain housing demand, Wong said. That is despite DBS Group Holdings, the city state’s biggest bank, saying last month that the only “caveat” in an otherwise healthy performance was the net shrinkage in its mortgage book.
Wong said on May 30 that “interest rates are still quite low, compared with the past”.
“The liquidity is still there,” he said. “Not to mention that over the years with growing economies and rising affluence, people have funds and they’re looking to invest. So, they will look for attractive assets, be it in the financial markets or property markets.”
Wong was also asked about income and social inequality in Singapore. According to him, Singapore wants to be a more inclusive society.
He said the government was putting in place a more progressive system with regard to wealth taxes, centred largely on property. For lower-income earners, Wong said for every dollar of tax paid, they get $4 of benefits; for high-income earners, for every dollar of tax, they get half a dollar of benefits.
In the same interview, Wong defended the disclosure of executive pay at GIC and Temasek Holdings. He said the boards of these two sovereign wealth funds need to decide what is appropriate for disclosure when it comes to executive pay, with the government focusing on making sure the firms continue to perform.
Wong said GIC and Temasek had performed “creditably” under challenging market conditions, “In the end, GIC, Temasek will disclose whatever is necessary,” he said. “We also want to make sure that it’s not just the case of transparency or disclosure that will impact the broader objective of them achieving and maximising long-term returns on our portfolio.”