It is always good to hear different opinions and views from other people. It makes us think and challenge our own believes and views.
The article written by Andy Mukherjee offers a different perspective on the Singapore residential property market. There are a few concerns raised by Andy regarding the current exuberance in the property market. Those are valid points, but perhaps we can try looking at things from another perspective:
Andy: Rents might not be able to catch up with prices due to slower population growth
SPK: There is no doubt that population growth has slowed considerably during the last 5 to 8 years and the impact on housing was obvious – high vacancy, lower rent, longer time to lease. But let’s look at things from an economic planning perspective. Singapore is facing an aging population issue and in order to stay competitive, the immigration policy has to be relaxed to replenish the workforce. Probably the reason that the government put a halt to the loose immigration policy in the past was part of a populist policy to address unhappiness of overcrowding and competition for jobs. But with the new infrastructure and amenities in place and vacancies to fill, it will not be surprising for the government to start relaxing immigration and foreign employment policies in order to keep the economy going. That will eventually translate to greater demand for housing.
Andy: Affordability is an issue. Monthly household income can only buy 1.6 sqm of the median new home today, compare to the 2.3 sqm during 2003 SARS epidemic
SPK: Affordability is not just a function of price but the interest rate is also an important variable in the affordability equation. This is particularly true for a country like Singapore, where the majority of the people take loans to finance their property purchase. A higher priced property financed at lower interest rate may have similar monthly mortgage payment as a lower priced property financed at a higher interest rate. Hence, it is also important to compare the interest rates during SARS and today to have a better understanding of affordability in the context of mortgage repayment.
Andy: Government may step in to curb the enthusiasm in the property market
SPK: Yes, this will eventually happen. But only when property prices run up significantly, which might lead to a systemic risk to the economy and banking system. As SPK mentioned in an earlier post, it is not the time yet for government to introduce new cooling measures.
Some food for thought. Feel free to share your opinion.