By Property Soul (Guest Contributor)
Deputy Prime Minister and Finance Minister TharmanShanmugaratnam recently told the press that there is “some distance to go in achieving a meaningful correction,” hinting that the property cooling measures are here to stay.
I am surprised by MrTharman’s creative use of the word ‘meaningful’. It is an adjective or a descriptive word that leaves much room for imagination. It is up to the target audience to figure out the real meaning behind it.
When the government replies with a definite yes or no answer, you are certain what is next.
When the government replies with a vague answer, you are confused what to do next.
When the government replies with a descriptive answer, you are fearful of what will happen next.
– Property Soul
How to define meaningful?
The word ‘meaningful’ means significant or serious, meaning to say that the government would like to see a sizable market correction before they consider reversing any of the cooling measures.
So, what does ‘meaningful’ mean? Is it a major correction in price level? A massive slump in transaction volumes? A prolonged depressed market? A big drop in the number of first-time or multiple-property buyers? Is it more meaningful to measure in percentage, values, dollars or length of time?
Waiting for the meaningful time
When the Singapore government will call for an election is everyone’s guess. The timing of the next election also gives any lifting of the cooling measures a whole new meaning.
When many voters find private properties unattainable or overpriced, it is meaningful to sacrifice the interests of a comparatively smaller group – namely the stakeholders in the real estate industry, including the developers, agents and consultants. After all, it is a great opportunity to narrow the widening gap between the haves and have not sin society.
On the other hand, if the relaxation of cooling measures comes too late, and the property market continues to correct, it can make the final withdrawal meaningless.
I’m afraid that if you look at a thing long enough, it loses all of its meaning.
– Andy Warhol, American artist
Take the example of a primary school student who needs to do corrections for a wrong answer. There are still mistakes after the correction and he is asked to redo the correction again. But there is still room for improvement so the teacher asks the student to redo it again and again. When the teacher finally puts that long-awaited tick there, the whole thing has long become meaningless in the eyes of the student.
From 1998 to 1999 and 2001 to 2005, there were countless introductions of property purchase incentives – suspension of land sales, lifting of capital gains tax, property tax rebates, lower cash deposits, higher loan-to-value limits up to 90 percent, cash rebates and interest-free loans from the banks, etc. But the market responded with a lower PPI (Property Price Index) and transaction volume compared with the last quarter.
Property, like comedy, is all about timing. Action is futile when it comes too early or too late.
What it means for different parties
We all have our own vested interest. Every time there is a new policy, we give it thumbs up or down depending on how we can benefit from it.
1. The public deserves some meaningful data
Both the URA and SRX data do not reflect the rebates and subsidies from developers to buyers. Lodgment of caveats is also based on voluntary submission. Property data is incomplete and PPI is inflated. What is the meaning of reporting the data when they do not represent the full picture?
2. Home buyers are waiting for a meaningful correction
MinisterTharman’s words that the government cannot let “property prices run ahead of the growth of household incomes over the long term” are as sweet as honey to people looking to buy an affordable private property. His comment especially means something to the home upgraders. They are all waiting for property prices to fall back to a level in par with general affordability again.
3. Sellers find cooling measures too mean
The cooling measures coincide with a market softening and the expected oversupply over the next two years. No one likes the feeling of being left holding the hot potato when the music stops. Over-stocked developers and desperate sellers are the most likely parties who will trigger the domino effect in a market correction.
4. Investors are waiting for meaningful hints to enter market again
National Development Minister Khaw Boon Wan mentioned that there is still room for prices to moderate. The worse the market sentiment, the more often the developers, agents and sellers tell the media that “market shows signs of recovery”, “prices will pick up next year”, “market has reached bottom”, etc. The contradicting comments are confusing investors who are holding their horses.
5. More owners will end up with a meaningless investment.
With the impact of falling rental demand starting to surface, more landlords are feeling the pain of their already humble return of under 3 percent. It is meaningless to hold onto an investment that can’t generate a positive return.
Owners are also under the constant threat from the continuing softening of the market, inevitable hike in interest rates, and the potential onset of another recession. Those with little holding power are just hoping to survive a meaningful correction with their meaningless investment.