The government in Singapore has pledged that it will not intervene too much in the country’s real estate market but it will not stand buy and let rampant speculation take hold. National Development Minister Mah Bow Tan said that any intervention would be ‘done sparingly’ and the aim was to have an independent and stable property market.
‘We try not to intervene but when we do, we do it only because we want the market to work better. We let the market set the prices but we intervene to make sure the price is in line with fundamentals and there is no excessive demand from excessive speculation,’ he explained.
He was responding to recent comments by the president of the Real Estate Developers’ Association of Singapore, Simon Cheong, who questioned the need for government intervention to halt the rise of private home prices.
Cheong believes that the Government should shoulder some of the responsibility for shortages of land supply and escalating property prices. Bow Tan said that the Government wants to ensure, for example, that demand is driven by people who want to live in the property, or invest for the long term. ‘That’s the position we take. We don’t intervene unless we have to and only when we think the market is not working well,’ he added.
He also said that a property bubble would not be good for the market and the public should be skeptical of developers who say otherwise. ‘It may be good for developers, but it’s certainly not good for people who want to buy. When the bubble bursts, everybody gets hurt. If developers talk up the market, and people believe them, and prices go up and spiral out of control, then the more we will be forced to act. So I hope people realise that,’ he added.
There is a lot of concern about growth in the market. Residential property transactions for both new and resale homes are soaring with the latest figures showing a jump of more than 130% last year despite the global economic downturn.
It is hoped though that a new residential property index will increase transparency in the real estate market and stability at a time when prices are also soaring. The new Singapore Residential Price Index (SRPI) formulated by the Institute of Real Estate Studies at the National University of Singapore will track prices of completed private non-landed homes month on month and will provide owners, investors, banks and property watchers with a key source of price data.
Property experts believe that it will be a more useful and timely index than the quarterly one put out by the Urban Redevelopment Authority. It can also serve as a reference index that will help expand the suite of property based financial products, such as property derivatives. The index is based on the transacted prices of a selected basket that broadly represents the target market. Therefore, landed homes, projects that are more than a decade old, and those that are small, rarely traded or targeted for collective sales, are excluded. The basket will change every two years to reflect changes in the completed stock of private non-landed homes.