Source : Straits Times - 7 Feb 2009
I REFER to Thursday’s article, “Property sector needs govt help in refinancing $12b of debt”.
Over the years, the prices of private and public housing have increased tremendously. There were cases in which private property prices increased more than twofold.
During boom times, people seemed to have forgotten that their wage increase has not kept pace with the property price hike. It was certainly a signal to the build-up of a property bubble.
The article quoted a background paper by the Asian Public Real Estate Association (Aprea) as saying that “inability to raise credit and refinance could lead to foreclosures, bankruptcies and forced sales, leading to market instability and a potential downward spiral”.
No doubt, there are risks in any financial decision. If it is the will of the developers and individuals to partake in such risks for profit, then they should be willing to take on losses as well, be it in property dealings or otherwise, boom time or not.
Should it then be the Government’s responsibility to bail them out when things turn sour?
The Aprea paper also stated that “the collapse of an otherwise healthy real estate market caused by credit paralysis has the potential to significantly aggravate recessionary pressures”.
I would like to ask Aprea how to define a “healthy real estate market”. Does an upward price trend equate healthy real estate? Is a reduction in property prices, which has caused some property developers to fold or consolidate, a very unhealthy one?
There are peaks and troughs in any economic cycle. As much as we would like to ride through this difficult time as quickly as possible, it is my belief that prudence should prevail over haste.
Mr Christopher Ng
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