No artificial boosters: Mah

Source : Today - 27 Nov 2008

There are limits to what Govt can and should do, says Minister

WHEN it comes to dealing with weak demand in the domestic property market, developers and officialdom may not exactly be on the same page right now.

And it couldn’t have been more evident during last night’s 49th anniversary dinner of the Real Estate Developers’ Association of Singapore (Redas).

Delivering his prepared speech as guest-of-honour, National Development Minister Mah Bow Tan made it plain that there were “limits to what the Government can and should do”.

For instance, it will not dictate that banks must lend to firms or individuals with weak financial standing, said Mr Mah.

“We also cannot work against market forces and try to prop up property prices artificially. Such efforts are not sustainable and will not be beneficial to the health of the property market in the long-run,” he added.

All actions must be “carefully calibrated”, he said, as “any measure seen to be knee-jerk or excessive might even weigh market sentiment down further”.

His basic principle is for property prices - which sometimes “behave erratically” - to move in line with economic fundamentals. Inevitably, a weakening economy will weigh on demand and prices, he said.

The Government’s aim is for the property market- a cornerstone of the Singapore economy andaccountable for 13 per cent of total employment here - to function “smoothly and efficiently”.

Stability is also important; the deferred payment scheme was scrapped last year to encourage financial prudence, said the Minister.

Redas’ request

From the developers’ perspective, the third quarter’s fall in private home prices - the first decline in four years - was not good news. Also, office rentals have been easing while property supply is expanding.

The market right now is “fragile and nervous”, Redas president Simon Cheong said in his speech.

To him, a widespread plunge in asset values must be prevented and credit markets must function to shore up confidence. “Only with confidence will demand return to the market,” said Mr Cheong.

“To do this, a tripartite plan of action is needed between developers, financiers and the Government, through moderating new supply, shoring up demand and introducing fiscal measures to help ease funding for the industry.”

He said Redas hoped to work closely with the Government to “come up with new concrete measures that will help get some traction back for the real estate market”.

Mr Cheong then urged industry players present to do their best to provide the Government with “timely market feedback to facilitate a timely and effective response that the property market needs”.

Feedback was also what the Minister called for.

“It is not all doom and gloom,” said Mr Mah, hopeful that several major projects secured will create jobs and sustain capital spending over the “next few years”.

Also, “we will not hesitate to reactivate some of these deferred projects at an appropriate time, if necessary, to boost the industry when construction costs come down and manpower and materials shortages are less serious,” said Mr Mah.

But at least one property player is hoping for a greater helping hand from the authorities.

“The market’s driven by sentiment and the Government can do more,” said a senior executive from a mid-sized developer. He feels deferring the stamp duty payable on property purchases and bringing back the deferred payment scheme would help.

“Not all who use the deferred payment scheme are speculators. There are HDB upgraders who haven’t sold their flat yet and have trouble financing, and the scheme can help them,” said the executive who declined to be named.