Thursday, 15 November 2018
I am very happy to join you this evening for REDAS’ Anniversary Dinner. I have attended the last two anniversary dinners for REDAS, so I am very happy that I can complete the ‘hat trick’ and make it three times in a row.
Tonight, I join all REDAS members in recognising our industry captains. There are many of you here – a few of the REDAS pioneers are above the age of 70, making you the ‘Pioneer Generation’, as well as those from their 60s – who are now officially known as our ‘Merdeka Generation’. All of you have played an important role in building up Singapore during our formative years. I thank all of you – REDAS members from our Pioneer and Merdeka Generations, as well as our real estate developers, for your many contributions in building our nation.
Real estate and property is something that Singaporeans care deeply about. Residential property is a home and an asset for many people – it is probably the single largest asset that many people own.
Understandably, there will always be differing views when it comes to the property market. Developers like yourselves, existing property owners and potential sellers will say that the market is very subdued and there is scope for prices to go up. Buyers, on the other hand, especially those who are aspiring to buy their first private property, will say that prices are too high, that developers are reducing unit sizes and compromising the liveability of their residential spaces.
The Government is in the position of having to take the responsibility and weigh these different views carefully. At the end of the day, our actions and decisions are guided, not just by these diverse feedback and representations, but also by data and facts.
Experience here and abroad has shown that, left to itself, the property market tends to go through large price swings. Some speculators may like the large price swings, because they want to buy low and sell high. But our own experience has shown that if corrective actions are not taken to prevent a bubble from forming, the costs will eventually be larger and more painful. Ultimately, this will harm the vast majority of genuine home buyers and owners.
In the last property cycle, the Government acted after a very sharp rise in prices. We had to intervene eight times before stability was restored. That is why, learning from that experience, we decided to move quickly to implement the latest round of cooling measures in July this year. Why did we do so? What was the basis for the measures that were implemented? Let us look at the data and the facts.
Within a period of 12 months from mid-2017 to mid-2018, prices had increased by more than nine per cent. To put this in context, in the last cycle, it took the Government eight rounds of cooling measures over a period of four years – and over this period of four years, prices came down by about 12 per cent. But within one year, prices had shot back up by nine per cent. And there was every indication that the price increase would continue, because the developers’ bids for Government Land Sales (GLS) sites indicated quite bullish expectations of a continued rapid increase in property prices.
We were at a very real risk of having price increases that would run ahead of economic fundamentals. The pace of price increase over that twelve-month period was already almost double that of household income growth in 2017. If prices had continued to grow at that pace and outpaced fundamentals, there would eventually be a destabilising correction later on that would be even more painful for everyone – both sellers and buyers.
That is why the measures were put in place. They were intended to moderate the cycle. Four months on since July, we have seen the results – prices have not come down. They are flattish, or perhaps increasing at a very gradual rate. Land sales and overall transaction volumes have moderated. Importantly, the measures have encouraged en-bloc sellers and developers to be more realistic in their price expectations, which was what the Government had intended. The collective sales fervour had cooled noticeably, because the measures were intended to achieve that.
Let me be very clear. The Government cannot, and will not take a hands-off attitude to the property cycle. So, there should not be any surprise when we intervene in the market, because that is our approach and attitude. I do not think any responsible government should do so. Instead, we will do whatever we can to prevent property bubbles from forming, and to minimise exuberance in the market.
Our aim is not to bring prices down, but to steady the property cycle and to stabilise the market – to have a steady and sustained property market, where prices move broadly in line with income growth, or fundamentals.
Imagine what the alternative would be. We can imagine a scenario where the Government does not do anything. Prices would rise sharply in the near term – it had gone up by nine per cent over the last year, as I mentioned empirically. If we had not done anything in July, what would the price have been at the end of this year? Would it have naturally corrected itself? No one can tell, but I would imagine that there would be significant momentum behind the prices. The natural tendency of market dynamics would be such that prices would go beyond nine per cent, possibly double-digits by the end of 2018.
All of you know the fear of missing out is extremely powerful. It is a very strong force amongst buyers; they will come, they will enter the market, so prices would continue to rise sharply and then like in any bubble, this will be followed by a sharp decline in a few years’ time. We are already facing significant headwinds in the external environment, with trade and the global economy slowing down, and interest rates likely to go up. On top of that, within our domestic market, more supply is coming on-stream.
If we had not done anything, it is very likely that this year, prices would have exceeded a 10 per cent increase, maybe even gone up to 15 per cent, and this would continue next year. In such a scenario, in two to three years’ time, there would be another crash. Many more Singaporeans would be hurt. That is the reason why we had to move with the cooling measures.
I spent some time explaining our thinking and the rationale for the measures, so you understand the thought processes in Government when we make a move like this. Hopefully, this will also help you to understand the framework in which the Government thinks about the property cycle, and you can then plan ahead in your own business planning and decisions.
Some of you may have a different view. You may think that it is better for the Government not to be involved at all. Let the market run its own course, with the Government not being involved in the market, in a complete laissez-faire situation.
That is a different view, but the Government’s view is one where we believe that intervention is necessary to achieve a stable property market; one where prices continue to rise steadily in line with fundamentals. We believe that this approach is one that will yield more benefits for the majority of Singaporeans in the long term. Those who own homes for the long term – either for living in them, or investment – will benefit ultimately.
I understand and recognise that all of you as developers have short-term commercial imperatives. But I hope that you will also appreciate and understand the basis for the Government’s actions and why we think this is the more responsible approach to take in the longer term, and why we believe this is the approach that will benefit more Singaporeans in the longer term.
It is precisely because we are focusing on our economic fundamentals, that we are also hard at work in transforming our economy. The more our economy grows, the more household income increases; the more we are likely to see sustained and steady price increases in housing prices.
We have every reason to be confident about our future, because we are hard at work transforming industries, industry by industry, and putting in place transformation plans. The Built Environment sector has a big part to play in this transformation.
I am very happy that REDAS is stepping up its engagement with stakeholders and partners to support this work. We have many projects in the pipeline, which will go a long way into transforming our urban environment. One major move, as many of you are aware, is that we are developing new clusters outside of the city centre. In the west, we have the new Tuas Mega Port and the Jurong Lake District. In the north, we have the Woodlands Regional Centre and the Rapid Transit System (RTS) Link, as well as the Punggol Digital District. In the east, we have the Changi Gateway, anchored by the new Terminal Five. These will provide new opportunities for growth, and bring more jobs and amenities closer to our existing residential estates.
Within the city centre itself, we are also making changes. We want to inject more mixed-use and live-in elements, increase utilisation of office spaces in the CBD beyond office hours, and provide more housing options for people working in the CBD. In the longer term, there will be opportunities to expand our CBD and develop the Greater Southern Waterfront, especially when the ports move over to Tuas.
URA has been working on these and many other proposals. It has been engaging many stakeholders through focus group discussions, dialogues and exhibitions. It will be presenting the proposals in a Draft Master Plan exhibition next year for feedback and views. These are our longer term opportunities.
I understand that the industry now is in a more subdued mode, given the recent cooling measures. As I said and would like to re-emphasise, we are not putting in place measures to bring down prices. Our aim is to steady the cycle, moderate the excesses, and ensure that the property market remains stable and prices remain stable. That is our aim.
If you look beyond the cycle, I am sure there will be many opportunities for REDAS and real estate developers coming up. We have many exciting plans ahead in the pipeline. We are at the crux of an urban transformation journey, because we have reached a stage in our development where there are many new projects coming on-stream – with our airport, sea ports, new districts, new clusters, new infrastructure to be built.
There will be many opportunities for REDAS and real estate developers to contribute in shaping and realising these urban transformation plans. You are our key partners in building our future Singapore. We look forward to working closely with all of you in coming up with more innovative ideas and strategies to build a resilient and vibrant global city and ultimately, to make sure that this remains an endearing home for Singaporeans for many more decades to come.
Thank you very much. Happy anniversary once again to REDAS.