Last Thursday, Managing Director of Monetary Authority of Singapore (MAS) Ravi Menon mentioned at the annual report media conference that it is “not time yet to ease the cooling measures”, “they remain necessary” and “easing the measures now would send a wrong signal”.
Sorry, cooling measures are to stay
Menon cited two reasons for the decision: 1) Good pick-up of recent project launches under low interest rate environment; and 2) Increased tightening of property buying restrictions in other countries.
Menon emphasized that “property prices should be aligned with broader income trends in the economy and the government will not let “property prices increase faster than nominal GDP growth”.
Private residential property prices have climbed 60 percent over 17 quarters, but only declined less than 12 percent in the last 14 quarters.
Menon restated that MOF, MND, and MAS were all very clear in the March announcement that the adjustments “were made for very specific reasons and purposes” and the government has never changed its position on the TDSR structure, Additional Buyer’s Stamp Duty and Loan-to-Value limits.
“The calibrated adjustments by the government earlier this year do not signal the start of an unwinding of the property cooling measures, as some commentators have suggested.”
Oops, MAS just gave industry stakeholders who speculated further relaxation of cooling measures a real slap on the face!
The market tends to make us look foolish most of the time, isn’t it?
Those who recently bought on deferred payment scheme or stay-then-pay programme should now realize that the wait may not be just one to two years’ time.
Edmund Tie & Co told the media last month that one investor takes ABSD in buying properties as the COE in buying cars, if the government is not lifting ABSD.
What the investor fails to see is: All car owners have to pay COE to drive a car. But not all property owners have to pay ABSD to buy a home. It depends on when they buy it and whether they are buying their first property.
Next time when he is competing with other owners of similar units in the same project for tenants or buyers, he will realize that they are not competing on equal footings because of the ABSD he has paid.
Why some commentators still don’t get it?
In fact, the commentators are not being slapped once but again and again by the government.
Every time when there was market speculation on relaxation of the cooling measures, the government would not hesitate to come upfront and put it straight.
A contrarian’s view? Who bothers?
You can’t blame industry stakeholders who assured you that the government will lift ABSD soon; or Morgan Stanley who predicted that Singapore property prices to double by 2030; or JLL who claimed that residential market will likely to recover by early 2018 – when home buyers are taking the plunge fearlessly; when new launch projects are selling like hot cakes; when developers are bidding hungrily for new sites like there’s no tomorrow.
All these analysts are predicting that the property market will recover any time soon. We haven’t seen such positive market sentiments for a long time.
Who bother to be a contrarian here?
I did have a few blog posts with a different view:
1) It’s not bottoming-out. It’s dead cat bounce.
2) 3 reasons why adjustments to property measures is not a good sign
3) Who said property cooling measures may never be lifted?
I am not saying that the property market will crash soon. I just believe that the market is going to be different from what the local media and industry stakeholders are predicting.
Ken Fisher said in his book Beat the Crowd that a contrarian doesn’t have to hold an “opposite view” from the majority. A contrarian just holds a “different view”. If most people believe that this is what‘s going to happen in the market, the contrarian simply believes that something else will.
History tells us that the market likes to make most of us look foolish most of the time. It always gives us an anti-climax at the maximum point of optimism.
“The contrarian looks for things the herd and curmudgeons ignore – they branch out. Or they look at the same things but see them differently. Both actions let them find the risks and opportunities most others miss.”
“A 60% or 70% success rate keeps you well ahead of most … if you’re right 70% of the time in this realm, you become an absolute living legend.”
You see, I am only targeting 60 percent or at most 70 percent of the time to be right. I said it about Iskandar and Malaysia properties 3 years ago in 2014. I said it about market slowdown and some other things as well. It’s not too difficult to be 60 to 70 percent of the time correct, isn’t it?
Thanks for writing this. I share your thoughts too. I think I will have sweet dreams tonight after reading it.
Hahaha. We can always sleep well if we don’t buy on impulse or overcommit in property purchase.
In fact this is the sweet spot for govt … pty prices going down by 1%-2% p.a. Interest rates going up at snail’s pace. Basically hentak kaki. Existing owners won’t scream bloody murder that their “wealth” is being destroyed. While serious home buyers mostly still have jobs with sufficient pay increments to afford various type of homes.
If govt has a wish, it is to have this scenario continue for another 10 years. But as we all know, it won’t happen. The thing that will throw a spanner into the works will be an external economic shock and a regional or global recession. When that happens, rest assured govt will remove the cooling measures. But at that time almost nobody will buy.
I agree with you that the Singapore government can only do so much to keep the property market afloat. Afterall, Singapore is a small Red Dot and its economy is highly vulnerable to any mishap in the regional and global economy.
When there an economic crisis or depression, neither government cooling measures or stimulus mesaures are relevant to home buyers and property investors. It will go back to the basics like market confidence, cashflow, ability to finance, etc.
Thanks Vina for another gem of a report.
Many analysts are singing the same tune to talk up the market. They called the tweaks or refinements as easing of cooling measures despite so many officials debunking the views. These false trumpets did indeed create some dead cats bounce as manifested in the spikes of sales of new launches and some sales esp those more reasonably priced units. Those less patient buyers are naive enough to rush in instead of waiting out a full blown bargains.
‘Fools rush in when angels fear to thread.’
“‘Fools rush in when angels fear to thread” – I like what you quote from the poem.
The problem with our local media is that it is not looking for groundbreaking news (except rumours and gossips in Chinese papers), but going after “groupthink”.
The articles written are not meant to stimulate views, provoke thoughts or inspire ideas from the readers. They are meantly to support conventional wisdoms and widely-held beliefs. Above all, quotes and views from spokespersons or interviewees are often “sanitized” to synchronize with industry stakeholders and advertisers of the media.
Didn’t know that Tharman Shanmugaratnam was in Home Affairs & Law. Could it be a typo? Refer to 3 February 2016.
Thanks for spotting that. It should be “Home Affairs and Law Minister K Shanmugam” from the todayonline article at http://www.todayonline.com/business/government-has-rough-idea-when-lift-property-cooling-measures-shanmugam
Let me correct the mistake and replace with an image with bigger fonts.
Thanks for your insights. Cannot agree more. Although it sounds conspiracy theory alike, kinda feel that the real estate industry often portrays the outlook much better than it should be. After all, they earn based on sales and commission.
Yes, it is all because of “vested interests”. When the media interviews the industry stakeholders, it is no different from asking the fishmongers whether their fish is fresh or not.