Should Singaporeans Be Grateful for Property Cooling Measures?

By Property Soul (guest contributor)

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

But compared with our counterpart in Hong Kong, home prices there 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 takes the 7th place after Tokyo.

With strict criteria and a long waiting time of over 8 years for public housing, Hong Kong people are forced to go after private properties.

However, only people who have 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 needs 35 years of annual income (and without spending any of the income) to buy 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 came up with an article on “Hong Kong and Singapore property: One is winning on Chinese investors” (CNBC, Feb 17)

Obviously, investors from China are more interested in Hong Kong than Singapore properties. Last year, Chinese buyers invested $5.2 billion in Hong Kong’s real estate market, compared to only $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 at Colliers International.

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

Widened wealth gap amid rising property prices

A 2014 study done by NUS Department of Economics on “Income inequality in Singapore: Do housing prices play a role?” tried to spot the link between income inequality and housing prices. The results show a small but statistically significant effect of rising private residential property prices on labor income.

There are social implications when property prices are going through the roof. Those who sit on properties acquired when they are still cheap are laughing all the way to the bank. On the other hand, those who are late to the game are faced with increasingly unaffordable housing. High property prices widens the wealth gap between the ‘haves’ and the ‘don’t haves’.

The ‘haves’ can now leverage the increased property prices to upgrade their home or acquire more properties. On the other hand, the ‘don’t haves’ find themselves unable to afford a roof over their head.

There is a scene in a Hong Kong TV drama about two lovers saving to buy their first matrimonial home. One day the guy happily shared the good news with his fiancée. “Guess what I did today? I just put down the deposit for our home. Our dream has finally come true after all these years … Remember I told you my schoolmate who works in a bank? He helped us to 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 continued, “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 for holidays. I can’t go shopping to avoid spending money unnecessarily – all for the sake of saving every cent for the down payment of the most affordable flat. Yet housing prices are climbing much faster than the rate we save and whatever increment we get from our salary. We have no choice but to save even harder. Yet I still feel that the more and longer we save, the more unreachable our goal… 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 affordable to buyers?

Buying a home first or getting married first?

In Singapore, more are delaying their marriage to save up for the high cost of weddings, housing and having children. Young people need to spend time to build their career and be financial stable before settling down.

Three years back, the then National Development Minister Khaw Boon Wan told the media that the mentality of the new generation has changed. The sequence is to buy a home first, then get married before starting 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 if they try 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 put buying their own flat 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 can go in order to buy their own home. We all understand how these kind of reality TV shows like to exaggerate things to attract viewers.

An attractive 22-year-old girl put down ‘having his own property’ a must-have criterion in looking for her future husband. She says guys shouldn’t fish if they don’t own any property. Her dream home is a 2,000 sq ft apartment in a prestigious district. The reason? Women can only have sense of security if the property is their own. Women must feel safe and comfortable before they can come and conceive naturally.

Can someone go tell our Minister that millennial women are looking for much more than “a very small space to have sex” for reproduction?

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

Posted courtesy of www.Propwise.sg, a Singapore property blog dedicated to helping you understand the real estate market and make better decisions. Click here to get your free Property Beginner’s and Buyer’s Guide.

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