Keeping bubble trouble at bay

Cautious and calibrated, or potentially excessive? Reactions to the government's latest package of measures to cool a frothy property market have touched both ends of the spectrum. On the one hand, observers are generally agreed that the curbs announced on Monday – the third wave of measures in 11 months – amount to a careful, calculated approach aimed squarely at weeding out speculators from genuine home buyers.

The intent behind the moves is apparent enough: higher upfront cash payment, lower loan quantum, extended stamp-duty 'liability'. Not least, private property owners who buy an HDB resale flat must now sell the private property within six months. And, just to be doubly clear who these measures are targeted at, first-time buyers and home owners with no outstanding mortgages are out of the loop; they're not affected by the new rules.

But not a few – property market consultants and others – see the measures carrying a much bigger sting. Not only will the new moves rein in a wider catch beyond speculators but the hit on sentiment would really hurt the market, particularly the mass lower end of the private market, they say. This, of course, remains to be seen, since the recent anti-speculation measures of September 2009 and February 2010 obviously didn't do much - in a market flush with liquidity and economic confidence - to quell speculative fervour. Now, with a property bubble in the making - as National Development Minister Mah Bow Tan made clear on Monday - the latest curbs are timely and most welcome.

Look no further than the United States for a case, if any were needed, of the dire consequences from the bursting of a housing bubble. The financial and economic crisis that started in September 2008 was precipitated there by the failure of Fannie Mae and Freddie Mac, the US mortgage lenders.

In Singapore, while the bubble may not yet have burst, already socio-economic tensions around affordability are palpable as young first-time home buyers in particular, find themselves priced out of the market, even for public flats. It is prudent of the government to act decisively before a runaway market takes the economy down with it.

As in other areas of public policy, not everyone may emerge 'better off' as a result of any government decision. But to the extent that the new rules make property buying a rather more considered, even onerous, decision than landing a good buy, signing a cheque for a quick flip, that's well and good. Even better is the quashing of hopes of private home owners who seek big gains in the HDB market.

To be sure, the market impact of the latest measures must be monitored - not so much, as some have suggested, to adjust and ease back if the curbs hit more widely than expected. Rather, the government should indeed track the impact closely - and stand ready to do more if the speculative fervour shows no sign of abating.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.