Mailbag
Published June 29, 2006

LETTER TO THE EDITOR
Property asset bubble will hurt Singaporeans



I REFER to your article 'S'pore luxury home prices up 7.7% in Q2' (BT, June 22).


I urge the government to view the recent spike in luxury home prices with great caution instead of joy. Measures must be taken to ensure a property bubble does not develop. And if it were to develop, it must be confined to the luxury sector - that is, high-end properties only in districts 9, 10 and 11.

The price upsurge must not be allowed to spill over to the rest of the residential property market. There are three important reasons: Firstly, asset inflation in residential properties will only hurt Singaporeans, who mostly own only one property.

Secondly, with interest rates on a secular long-term uptrend, new young Singapore family buyers will face a double whammy if prices are higher as both bank loans and charge rates will be higher.

Thirdly, the adverse effects of the 1996/7 bubble burst that hurt many Singaporeans should not be forgotten. Savvy property developers are already making huge profits, and we cannot fault them for that.

However, the government must be vigilant for the sake of the overall long-term interest of the general public.

An asset bubble offers little long-term benefits to the economy. If anything, its likely net effect is a huge redistribution of wealth from the poorer general public to savvy property developers and the very rich.

Chua Soon Hock
Managing director
Asia Genesis Asset
Management Pte Ltd