Housing: If the Minister is worried, should we be, too?

Housing: If the Minister is worried, should we be, too?
By www.MoneyMatters.sg | Property Blog

14 Jun 2011

In a post titled "My Worries" on his blog "Housing Matters", Minister Khaw Boon Wan expressed his concerns about the current euphoric state of the housing market, and cautioned that "sharp property price increases cannot go on forever." In this article we'll take a look at the reasons for his cautious outlook on the market and consider if it makes sense for us to be worried as well.

Reason #1 — The large supply of units under construction and in the pipeline

"35,000 private units (condos and landed properties) have already been sold, though still in construction, with payments in various stages of completion. But there are 45,000 units in the pipeline, waiting to be built and sold."

Minister Khaw and many property analysts are concerned about the large upcoming supply. DTZ estimates a completion of 32,359 units in 2013-2014 versus the 17,501 units in 2011-2012. If we combine that with weak demand from, say, poor economic growth or higher interest rates, that could be a recipe for disaster.

We know that the upcoming supply is large, but whether prices will fall depends on a key variable that is hard to predict: demand. Credit Suisse thinks that if immigration growth remains at above 70,000 per annum the oversupply can be absorbed by the market without a significant fall in prices. However, immigration policy has become politicised post the recent May election, so it remains to be seen if the government will continue to pursue its pro-immigration policy at the same rate as before.

Reason #2 — The government plans to boost supply even further

On 9 June 2011 the Ministry of National Development announced the 2nd Half 2011 Government Land Sales (GLS) program — an estimated total of 8,115 housing units are on the Confirmed List and 6,080 on the Reserve List, for a potential additional supply of more than 14,000 units. Even if the sites on the Reserve List are not triggered by developer bids, as Minister Khaw says: "Together with committed investments, some 53,000 units will be looking for buyers over the next couple of years or so. That is not a trivial number."

Not to mention that due to widespread anxiety in the public from sharp property price increases, the government is also planning to increase the number of units and speed of construction of HDB flats, which will become a headwind to the mass market private property segment.

Reason #3 — The volatile global situation could impact Singapore

Minister Khaw mentioned the following external situations that worry him:

- The European sovereign debt overhang which will take time to resolve

- The Middle East crisis which could lead to an oil price hike and slowing economic growth

Off the top of my head, I can think of at least two more "black swans" that could cause markets to plunge:

- The end of QE2 (Quantitative Easing Program) in the US in end June and current impasse on the debt ceiling

- Nuclear and tsunami fallout situation in Japan which could cause hiccups in the global supply chain

In the most recent quarter, foreign buyers made up 16 percent of all buyers of private property. Many property investors in Singapore are also looking to rent out their property to foreigners, as the locals usually prefer to buy if they can afford it. In the event of one or more of the above situations deteriorating into a full blow crisis, foreign demand for purchase and rental can disappear suddenly.

But for now the fundamental causes of the rise in the property markets all around Asia — low interest rates and ample liquidity — are still present. Rising inflation makes matters worse as people worry about the falling value of their bank deposits due to negative interest rates, and are desperate to deploy their cash in any asset that they believe will be a hedge against inflation.

Some analysts expect interest rates to start rising towards the end of 2011. Together with falling rental yields as rising prices are not matched by rising rents, this could result in a tenuous situation for overleveraged investors.

So should we be worried?

So if the Minister is worried about the Singapore property market, should we be too? I think we should be more cautious in our property investment decisions for all the reasons mentioned above, and I'll add one more to the list: policy risk.

If Minister Khaw is worried about sharply rising prices, it increases the risk of additional anti-speculation measures coming out, or of the Government boosting supply beyond what the market can absorb. Already last week we've seen the Hong Kong Government raising the minimum down payment requirements for housing.

Property is not only a cyclical sector, but due to its nature there are significant time lags from when a policy is implemented to when we see the effects. These time lags amplify the ups and downs of the cycle as the increased supply that is being built today could get completed at a time when demand has fallen off. It is not easy for anyone to forecast three or four years into the future.

This is not to say that prices WILL go down — demand for Singapore property could unexpectedly increase as well, but my advice to all budding property investors would be to do your sums carefully and not overstretch yourself. The time for greed is fading, and the time for fear is ascending.

Mr. Propwise is the founder of www.Propwise.sg, a Singapore property blog dedicated to helping you understand the real estate market and make better decisions.

Ministers turn to web to connect with citizens

Ministers turn to web to connect with citizens
By Faris Mokhtar | SingaporeScene – Mon, Jun 13, 2011.. .

http://sg.news.yahoo.com/blogs/singaporescene/connecting-netizens-online-way-094244453.html


Ministers are taking to social media to enagge citizens and gather ground sentiments on policy issues.


Ministers from the ruling People's Action Party (PAP) are increasingly taking to social media to engage the public and address issues in relation to their respective ministries.

Political observers who spoke to Yahoo! Singapore said the initiative to engage the online community comes in the wake of the General Election on May 7, during which one of the key grouses was that the government failed to sufficiently engage and elicit feedback from citizens.

But all that seems to have changed.

In recent weeks, no less than three ministers have taken to blogs and Facebook to connect with netizens and explain their polices directly to the web community.

Among them is new Housing Minister Khaw Boon Wan who has been actively posting articles on his blog called "Housing Matters".

In one of his recent posts, Mr Khaw — who has been an active blogger since his days as Health Minister — sparked debate on the culling of cats, urging the AVA to seek out new approach to handle the stray cat population.

In an article posted on June 6, Mr Khaw also called on netizens to propose alternative solutions to tackle the problem of strong wind wetting the floors of HDB apartments.



Through his blog, Housing Minister Khaw Boon Wan shares his thoughts on housing issues and solicits feedback from …


Unknown to most, new Environment Minister Dr Vivian Balakrishnan has also been updating his blog regularly — even prior to the General Election this year.

Two Sundays ago, the Minister addressed the issue of flooding which affected several parts of Singapore, including the badly-hit Tanglin Mall.

Among the five key issues addressed in his blog, Dr Balakrishnan called on the country's national water agency Public Utilities Board (PUB) to "systematically review every single flood prone area and take all necessary action to ensure public safety". This he said must be done urgently and comprehensively.

Meanwhile, Transport Minister Lui Tuck Yew has increased engagement efforts to his Facebook page. He can be seen personally responding to queries and suggestions posted on his Facebook 'wall'.

Emeritus Senior Minister Goh Chok Tong has also been using his Facebook page 'MParader' to gather feedback on pertinent issues. Previously, he had asked the public to select the top two hot-button issues.

After tallying the total number of comments received, foreign immigration — which garnered 81 responses — was ranked as the number one issue followed by housing and education.

Based on these findings, the senior minister has already set up plans for a "chit chat session" in which 40 respondents will be invited to attend a face-to-face meeting.



Emeritus Senior Minister Goh Chok Tong has set up a dialogue to discuss hot-button issues with Facebook users. …


Political watcher Eugene Tan, said the trend of leveraging on social media is a sign of the changing times, where Singaporeans expect the politicians to communicate online.

This he added, provide a more direct and personal access to Singaporeans.

In contrast, the conventional methods of disseminating government-related information through press releases and statements by civil servants are regarded as "faceless modes, lacking in accessibility".

"A Minister's use of online media enables the Minister to not only communicate directly but also to seek feedback and get a sense of public sentiment," said Tan who is also assistant professor at the Singapore Management University.

Efforts to engage those online could also be attributed to the recent general election, said former editor of Today newspaper PN Balji.

This he added, has shaken politicians — especially those from the ruling party — into action.

However, he noted that the government is still "very hesitant" to fully latch itself onto social media, referring its policy of not responding to views on online websites — other than those of the mainstream media — as an "archaic policy and unsustainable".

"The more it stays away, the bigger the loser it will be," he said.

Now that the communications paradigm has changed and with social media now part of politics, Balji said the government has no choice but to adapt.

And to communicate with those online — especially the youths — requires a new set of skills, which he added, the government has yet to understand.

"The government is not used to engaging the public in such a high-profile way. The language has to be different, the attitude has to be different," said Balji, who is currently director of the Asia Journalism Fellowship at the Nanyang Technological University (NTU).

"You can't be defensive, you need to be empathetic. You will step on wrong toes, learn from mistakes, make up and continue to dance. I don't think the government understands this part of the game yet."

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