Government supply and anti-speculative measures adequate

NewsNovember 23, 2009

Minister Mah Bow Tan announced earlier today that HDB will release 10,000 to 12,000 new flats every year for the next five years. PropNex CEO Mr Mohamed Ismail feels that this is an adequate number.

“Although HDB is slated to release a total of 13,500 BTO flats this year (by the end of 2009),” he explains, “an oversupply would only serve to dampen the asset value of a majority of Singaporeans who are dwelling in HDB flats.”

He points out that there is also a continual supply of resale flats, which will potentially see 40,000 transactions this year alone; and buyers of these flats are, unlike those buying direct-sale flats from HDB, are also eligible for the maximum of grants amounting to $80,000.

However, says Mr Ismail, should the economy recover well, resulting in a greater number of Singaporeans holding well-paying or stable jobs, or if there is a greater number of PRs in the market, this could lead to greater demand in the HDB resale market.

“Either one of these could then result in a continuing buoyancy of the resale market,” says Mr Ismail, “and be the driving force higher COVs and greater demand for new flats, as newly married couples would hardly be likely to afford the high COVs. In that case, the Government should be prepared to release more than the projected number of 12,000 flats per year.”

On Mr Mah’s comments that the anti-speculative measures introduced in September have worked to some extent, but that it is too early to tell if some measures, such as the interest-absorption scheme (IAS), should be restored, Mr Ismail feels that it is the Government’s obvious stance to reduce speculation that was pivotal in curbing speculation and helping to prevent a property bubble.

“The government’s strong stand on the need for anti-speculation, coupled with its prompt and immediate response to the rapidly heating market (IAS removal and land release), is what has brought sanity to the property market by weeding out speculators and cautioning would-be private home owners,” opines Mr Ismail.

“The IAS removal only played a small part of the government measures,” he concludes. “But even as such, we do not think it is necessary for IAS restoration within the next one year.”

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