Daily Lessons from Life 09 June 2011 - Sharp fall in property prices "possible"

"Sharp fall in property prices "possible" - CNA 09 June 2011

SINGAPORE: Minister for National Development Khaw Boon Wan has sounded an alert on a possible sharp fall in property prices.

Writing on his blog, Mr Khaw said things can suddenly go very wrong.

He pointed out a strong supply of housing units is coming up.

About 35,000 private homes have already been sold.

Another 45,000 units are also waiting to be built and sold.

Mr Khaw warned a weak global economy could turn away foreign buyers who make up about 16 per cent of all buyers of private properties.

Rental demand can also fall quickly since many Singaporeans also buy properties to lease to foreigners.

He said the impact of external shocks can be serious if the drop in demand happens when there's a substantial increase in supply.

He also said cost of borrowing and repayment must go up and households must factor this in.

Mr Khaw advised investors to bear these in mind before signing up for new houses."

It is interesting for the Minister of MND to sound the alarm that sky high property prices can drop sharply. The figure of 16% being foreign buyers of properties in Singapore can swell if one include PRs which are technically NOT Singaproeans.

Lessons for me are:

1. public housing must be affordable and NOT an investment property for the 1st time buyer, that include 1st time resale buyers;

2. private property prices must be subject to demand and supply TOTALLY as those who can afford it can go buy them. While those who wanted to 'profit' from it can go do that as long as they know the risks and are responsible enough to suffer the losses if any;

3. the 1st public housing MUST NOT be the bridge to the private property. If you want to buy private property, it must not be because you sell your 1st public housing at a higher price. Private properties are for those who truly can afford it and want to live in them. And if they can buy a 2nd private property for investment, let them be!!

It will be interesting to know how the new Minister of MND will set the guiding principles for Singapore housing. So far, there is NOT announcement of such guiding principles except to increase the supply of land to build public and private properties.