The government has concluded that it cannot take a “hands-off” approach to managing Singapore’s property market and allow asset bubbles to develop. “This is not what a responsible government would do,” says Lawrence Wong, Minister for National Development and Second Minister for Finance.

“Our aim is not to bring prices down, but to steady the cycle and to stabilise the market. [We want] to have a steady and sustained property market, moving broadly in line with income growth,” he reiterates. “This is a shift from the past where we tended to take a more laissez-faire approach [to the property market].”

The property market has shown that left to itself, it tends to go through large price swings. This harms genuine homebuyers and if corrective actions are not taken to prevent an asset bubble from forming, the costs would eventually be larger and more painful for everyone, the minister says.

“Investors have to consider what it means to buy property and the implications for property values,” says Wong. He warns that people’s fear of missing out may also lead them to be caught up in the price cycle.

The interplay between markets and state intervention is always at work in the real estate industry, especially in ensuring the affordability of housing. “We cannot just continue with the status quo and assume that property prices will always appreciate, regardless of fundamentals,” the minister says.

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IREUS

Wong was speaking at the National University of Singapore’s (NUS) conference on “Real Estate and Urban Studies”, which was held on May 24 at the Raffles City Convention Centre. The event was organised by the Institute of Real Estate and Urban Studies (IREUS), the university’s research unit for real estate studies.

The conference saw the official launch of the institute’s new name and focus. It was formerly known as the NUS Institute of Real Estate Studies. “The inclusion of the word ‘urban’ in the institute’s new name reflects the broadened scope of its research, covering urban issues in the context of cities and the built environment,” says Seek Ngee Huat, chairman of IREUS.

Big data analytics and property technologies have entered the curriculum of real estate and urban studies, expanding the role of IREUS. Many other macro trends like changing demographics, climate change, and socio-economic tensions will also provide rich research areas for the institute, Seek says.

“Learning from our own experiences [in real estate] and what other countries have done is certainly an area where we can all benefit from more in-depth research and analytical work,” says Wong. Policy thinking around these subjects has evolved over the years in tandem with major trends and needs, he adds.

Land use planning

In land-scarce Singapore, one of the ways the government has ensured the best use of the available land is through competitive government land sales, and allocating land by price generally helps to ensure that it will be put to the best use, Wong says. “This works quite well in most circumstances. But if we only rely on the market, many other uses will be priced out.”

These uses include green spaces, recreational areas, and places for community and civic purposes.

Lately, land zoning has not been easy to regulate given the changes in the local operating environment. “The traditional ways of zoning by residential, commercial, and industrial land are coming under some pressure because these definitions are blurring,” he says. For example, a food manufacturer may go into logistics, delivery, and even retail, and may want to house all that in one building. Meanwhile, the rise of short-term accommodation is becoming more prolific among residential properties, he adds.

All these cause tensions that need to be managed and they pose challenges to regulators, who must continuously review and update them. Some regulations may need to be changed and be made more flexible, and regulators should also guard against the tendency to keep rules too deeply entrenched and rigid, the minister says.

Wong notes that in Singapore, residential property is “both a home and the single largest asset for many people”. He cites a recent HSBC survey which found that Singaporeans had spent more time on property searches than reading bedtime stories to their children. “I don’t think this is necessarily a good thing, but it perhaps shows how strongly Singaporeans feel about real estate,” he says.

Analysing residential demand

A panel discussion was also held at the NUS conference. It featured Alan Cheong, head of research at Savills Singapore, alongside Sin Lye Chong, group director of land sales and administration at URA, and Prof Daniel McMillen of the University of Illinois (Chicago). The panel discussion was moderated by Ong Choon Fah, CEO of Edmund Tie & Co.

Cheong says: “With so much competition coming over the next few months, some in the industry are still paying commissions that are not in line with what some consultants believe they should be”, and this could partly explain the recent sales rates for new private homes. According to URA data for new private home sales in April, there was a 30% m-o-m decline in the number of units sold by developers, and most of the units sold came from projects launched last year.

Both Cheong and Ong also note that recent new private home sales point to some parents paying the downpayment for residential property investments for their children. Cheong believes this could help support future residential demand despite demographic changes, and amid concerns that GDP growth in the future is likely to be slower compared to previous decades.

However, Ong says: “We have also seen instances where parents brought their children to showflats, wanting to buy a residential property for them. But lately, the kids don’t seem that interested.” Some millennial buyers consider themselves global citizens and they want the flexibility to be able to move to different cities, she adds.

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