NATIONAL Development Minister Khaw Boon Wan is aiming for a "soft landing" for the housing market as "a market crash benefits no one", he said at Tuesday's Committee of Supply debate (INFOGRAPHIC: Improved affordability).
This was in reply to questions in parliament on the impact of government policies on the property market. The government was asked whether it would consider adjusting the Additional Buyer's Stamp Duty (ABSD) for Singaporean buyers when it is ready to unwind the cooling measures.
West Coast GRC Member of Parliament Foo Mee Har also asked at which point property cooling measures would be eased, in order to cushion any excessive price corrections.
While Mr Khaw did not directly answer the questions on the ABSD and the timing of policy changes, he agreed that the government "should not go into overdrive, and unwittingly undermine the retirement plan of our seniors who look to their housing assets for monetisation".
Earlier, Ms Foo had cautioned of the need to ensure that the "well intended" cooling measures are not overdone. "Given the huge new housing supply yet to hit the market and the impending rise of interest rates, we must be cautious that this downward price trend does not inadvertently get into a momentum and reach an unintended pace.
"Some industry players have told me that this is easier said than done. Their concern is that once a downward momentum begins, the downward pressure on prices may not be so easy to control, as we have seen in previous property cycles."
Lee Bee Wah (Nee Soon GRC) said that while the ABSD started out as an initiative to discourage unnecessary ownership of multiple properties, it has led to Singaporeans "who have spare cash" investing in riskier foreign properties.
"Coupled with low initial downpayments, and fewer restrictions in foreign property, Singaporeans are enticed to look abroad. This not only does little benefit to our economy, but puts our people at risk.
"I feel we should keep the Total Debt Servicing Ratio (TDSR) to encourage prudence in finance spending, but remove the ABSD for Singaporeans so they can invest in properties in Singapore."
MPs also noted that the cooled property market has made it difficult for retirees looking to sell their flats to right-size in order to fund their retirement. Those attempting to sell off their existing flat or private property within the six-month grace period before buying a resale flat are also struggling.
Since January 2013, Singapore citizens who already own a home have to pay an ABSD of 7 per cent on the purchase of a second residential property; this percentage climbs to 10 per cent on the third and subsequent property. This is seen as a measure to slow property investment and speculation.
Under the TDSR framework, borrowers' total monthly debt repayments (including car loans and credit cards) cannot exceed 60 per cent of their gross monthly income. This is a permanent measure to encourage financial prudence.
In his speech, Mr Khaw said: "Indeed, we should not overkill. The property market is in transition and it is a time that calls for vigilance and nimbleness. We will be careful."
He went on to share data to show how his ministry's efforts in taming the housing market has yielded results. HDB resale prices have risen from their previous trough in 2005. From 2005 to 2014, resale flat prices have gone up 87 per cent, while household income has gone up by 72 per cent.
Although Singapore is not yet at the 2005 affordability level, at least the affordability gap has narrowed from the 2011-2013 property market boom (see chart).
He added too that "sobering news" about the "acute" housing situations in cities such as London and Hong Kong put Singapore's "more benign situation" into better perspective.
During Tuesday's Committee of Supply debate, Mr Khaw also thanked MPs for their ideas on how to adjust the Lease Buyback Scheme. The new Lease Buyback Scheme, which is extended to four-room flats, takes effect in April.
He also said that he would mull proposals to introduce shorter lease tenure in some build-to-order projects to cater to different groups with varying needs. He will also consider raising the S$10,000 HDB income ceiling, after noting that couples are marrying later and income levels are rising.