In an article the last few days, Deputy Prime Minister Tharman Shanmugaratnam has indicated that housing prices are moving in the right direction and that the government has no plans for another round of cooling measures for now.
That signals a relief for the property market, developers, investors and home owners alike. He said that while the government is determined to lower prices relative to incomes, they do not want to cause a crash in the short term. That’s actually good to know that the government is not blindly implementing measures. As a property crash can have a devastating effect on the economy.
It is also a signal that steady housing price increases are believed to be healthy by the government. Unless the property prices suddenly jump up, the government is unlikely to introduce more cooling measures for the time being. Owners and investors can also take comfort that their property prices should remain stable and there is no need to go into panic selling mode.
As a result, property developer stocks have also run up as well. However, he mentioned that government is still willing to implement more measures if the prices get out of control again. One measure would be to control bank lending criteria, which is likely to be the mortgage service ratio for private properties as well.
On a long term basis, Singapore private properties should still do well. I am still long on Singapore private properties, especially freehold ones. Short to medium term risks would be increasing supply of completed properties in the next 2 years and possibly rising interest rates.
Prices relative to income would be more important for HDBs rather than private as HDBs are a necessity while private houses are more of a lifestyle. As the population grows even denser, more thought has to be put into how to keep public housing affordable, although delinking BTOs from resale flats is already a good step in that direction.
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