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Not time yet to relax cooling measures: CEOs

Property market hasn't quite stabilised, say industry leaders

[SINGAPORE] Despite a drastic drop in home sales and sliding home prices, cooling measures for the property sector should not be rolled back just yet, say CEOs and industry-group leaders polled by The Business Times.

Latest figures show home sales falling to their lowest since January 2009, while URA's overall private housing price index dipped 0.8 per cent over the quarter in Q4, against a 0.4 per cent rise in Q3.

Still, it may be premature to say the property market is stabilising, according to contributors to BT's "Views from the Top" column published today.

"More time is needed to assess that the cooling measures have indeed sustained their objective of managing property speculation," said Max Loh, country managing partner at Ernst & Young.

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Anecdotal evidence also suggests that demand for property remains hot. Lim Soon Hock, managing director of boutique corporate advisory firm Plan-B ICAG Pte Ltd, says: "If the frenzy at launches is anything to go by, the cooling measures should stay."

Prices are also still more than 50 per cent higher compared with 2009, points out Toby Koh, group managing director of Ademco Security Group.

Still, market watchers applaud the policy tools that have been wielded by the government.

Notably, the implementation of Total Debt Servicing Ratio (TDSR) has not only proved to be an effective curbing measure but has also shown that, to a large extent, low-cost financing has been a catalyst for property purchases, Mr Loh said.

The TDSR rule was introduced by the Monetary Authority of Singapore in June; it requires banks to take into account a borrower's total debt obligations when granting property loans. A borrower's monthly total debt repayments cannot exceed 60 per cent of his gross monthly income.

"With interest rates set to rise, continuing with the TDSR will help to promote financial prudence among both genuine homeowners and speculators," Mr Loh added.

Yeoh Oon Jin, executive chairman of PwC Singapore, noted that cooling measures take time to work through the property market. "Too much flip-flopping in implementing and withdrawing cooling measures in a short period of time may cause instability and undermine confidence in the market," he said.

Other measures rolled out over seven rounds of regulatory tightening include lower loan-to-value limits and a stiffer mortgage servicing ratio. Foreigners buying residential properties have also been paying an additional buyer's stamp duty, or ABSD, of 15 per cent since early last year, up from 10 per cent.

Some market watchers support the gradual removal of certain cooling measures later this year.

"TDSR holds the key and should stay as buying cannot be speculative, risky and dangerous," says David Leong, managing director of recruitment firm PeopleWorldwide Consulting Pte Ltd. "The ABSD should be systematically unwound and removed to restore buying for investors who can afford to hold for the middle to long term."

Some are also wary of oversupply, especially with global demand shifting overseas. Tan Tiong Cheng, executive chairman of Knight Frank, says: "Global liquidity is shifting back to the US and Europe, with investors changing strategies and seeking overseas properties.

"Coupled with a tighter immigration policy and a high supply of completed homes by 2016, future demand for homes could be muted and prices could correct more than expected. Tweaking cooling measures from the second half of this year in anticipation of medium-term risks could be necessary."

And, while some note that the cooling measures have curbed the excessive inflow of foreign money, others say Singapore runs the risk of losing business to competing countries this year.

"In 2014, savvy investors will look beyond Singapore's shores to profitable overseas property investing, with options such as buy-to-let hotel investment in key tourism hotspots such as Phuket being far more attractive than here at home," says Chris Comer, CEO of Castlewood Group.