STI Home > Review > Editorial

Jan 25, 2007

Order vital in home market

NATIONAL Development Minister Mah Bow Tan has timed well an important administrative intervention in the lusty property market. The industry and transactors who pay attention to trends have relied mainly on the quarterly private property price index, which gives a snapshot of price movements crunched to an indicative average. Anything 'average' is inherently suspect. Something analogous is apparent in the price index for 2006, based on incomplete data, which shows the market rose 10 per cent. This is the highest rise in seven years. But verify that with what market trackers are saying of the frenzied bidding for luxury apartments in Sentosa and Districts 9 and 10 having driven prices up by 25 to 35 per cent in this market band, whereas starter condo prices are reckoned to have gained 3 to 4 per cent at most. It is a serious matter from the perspective of price stability and the people's home-ownership dreams when excitable developers and trade analysts stoke consumer anxiety with unrestrained predictions of a price spiral. There are signs this has been happening. Mr Mah's job is to ensure an orderly market, to avoid dislocations like what came with the last big property-mad rush in the mid-1990s. This is not easy when the buying zeal of rich investors both Singaporean and foreign is bound to have a knock-on effect on prices downstream, in the absence of data specificity. It is important Mr Mah succeeds in avoiding a situation where, as he says, 'developers try to talk up the market and people who have not bought yet try to talk down the market'.

He is now having the Urban Redevelopment Authority publish three new price indices defined by geographical area - prime districts and Sentosa, Central excluding prime, and beyond Central. The last category will cover all the rest of Singapore that matters most to first-time buyers of private homes. It is socially desirable and politically astute that the vast number of serious buyers and aspirants in the third market band get reliable data to make viable comparisons before they sign off. These are HDB upgraders and some downgrader-retirees seeking affordable homes. They form the bedrock of the private market. The URA should, however, be prepared for the data disclosures having limited impact on the luxury segment and off-Central precincts. This market is shaped by highly liquid investors of both the long-term type and quick-profit-takers. Speculation is one element to guard against. The URA's decision to also publish data on sub-sales and approved projects should be taken as a broad hint that there are limits to churn activity which the authorities would endure.