Thursday, January 5, 2012

Rich as I am, it's still unfair to penalize me for wanting to be richer!


The wife and I are definitely NOT referring to ourselves...

The article below appeared in The Straits Times Forum page today.

Reference: Multi-property owner speaks up


Everyone is entitled to their own opinions (including Mr Tan) so here's our two cents: To say that every (rich) Singapore citizen should be entitled to own as many private residential properties as they desire without incurring additional taxes is akin to saying that owners of apartments in private condos should be entitled to as many free parking spaces as the number of cars they own. We have to acknowledge (even if we do not like it) that the later is impossible, especially with new condos these days. So why is it so difficult to accept the former?

Objectively speaking (and no, we do not work for the Government), the additional buyer's stamp duty (ABSD) is hardly putting citizens on equal footing with PRs or foreigners - Singapore citizens are allowed to purchase 2 properties before the ABSD kicks in, whereas PRs only get 1 and ABSD applies to the very first property that a foreigner buys.

So unless a native Singaporean has 3 wives that cannot live harmoniously under one roof (a situation that should warrant special exemption from ABSD, after he is charged with bigamy), we reckon that two private properties should more than satisfy his aspiration of home ownership with an extra for investment. Should he decides to plough more money into the market by investing in more than 2 properties, well... the Government has no obligation to continue supporting those profit aspirations, especially given the sky-rocketing home prices that many (not so rich) Singaporean are struggling to keep up with.

Finally, even the slightest hint that ABSD penalises one's "patriotism" to invest in local property is probably far-fetched. If the state of our property market is anything like those of the US or Ireland, we wonder how many of these "patriots" will continue to invest their monies here rather than abroad...


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11 comments:

Anonymous said...

Hi Folks @PropTalk, I think you're doing a great job, but I have to disagree with you on the ABSD. I am not rich and I believe it is the govt's role to provide affordable HDB flats to Singaporeans. But private condos should be left to market forces, esp since there are ECs to cater to HDB upgraders. The latest URA estimates show that condo prices were already moderating without ABSD. Surely it is not in anyone's interest if prices start to crash.

The Folks @PropTalk said...

Hi Anonymous (5/1/12, 6:52PM):

We agree that it is the government's role to provide affordable HDB flats to Singaporean.

However, we also believe it is the government's responsibility to prevent another real estate bubble from forming and that our property market does not follow the paths of Spain, Ireland and The United States - 23% of all US homes were in negative equity as at 31st Dec 2010.

Yes, the condo prices seem to be moderating. However, by "moderating" it still means that prices are increasing albeit at a much slower rate. Prices for mass-market homes, for example, is still more than 28% above their pre-financial crisis peak in 2008. This is despite the EU financial turmoils and US/China economic slowdowns that have been plaguing us since the middle of last year. And new units are still flying off the shelves at new launches (e.g. The Hillier) even after the imposition of ABSD.

We also agree with you that it is not in anyone's (Government included) interest to see our property market crashing. And since measures such as the SSD and ABSD are not set in stone, they can be reversed (if necessary) once our property market really starts to cool.

As such, we would much prefer for our government to intervene now rather than having to bail out scores of home owners whose properties are "under water" and facing foreclosure, if the property market remains unchecked and eventually crashes.

But we can always agree to disagree... :)

Anonymous said...

I seriously do not understand why people are comparing Spore property market to US! What happened in US were because of bad loans and excessive credit. You can buy 5-6 properties in US with absolutely no downpayment. On top of it, you can borrow from banks (rem Freedie Mac & Fanny Mae) even if you have no job, your credit history was bad etc. Try doing that in Spore! Besides, Spore land is so limited! In US, you can find so many similar houses in just one state alone! So pls, stop saying Spore will have a property crash like tat of US.

Anonymous said...

Hi Folks @Proptalk, yes we can agree to disagree. I also agree with Anonymous (6/1/12 2:30am) that the sub-prime situation in US is quite different from ours, given our high LTV ratio etc. I certainly hope that you are right about ABSD preventing another price bubble. Because if prices do come down by 20-30% as many analysts suggest, those Singaporeans who bought recently eg Bedok Residence @ $1350psf may be facing negative equity sooner than they think.

Anonymous said...

When you have excess cash, there are only few options you can do with the cash. Either you invest in share/bond, keep in the bank, foreign exchange, or invest in real estate. All of these activities have the same objective to protect your real capital against the inflation. The government choose to penalise real estate investment but leave the rest of tools which are equally risky unchange. There are already measures in IRAS to tax the property traders, and there is a 4 yrs seller stamp duty in place. I see there is no need for government to impose this ABSD for SG.

The Folks @PropTalk said...

Hi Anonymous (6/1/12, 2:30AM),

Interesting points made.

While we agree the issues faced by the US property market are different from Singapore (and by no means have we implied they are the same), we cannot help but wonder if the sub-prime crisis in the US could have been avoided (or mitigated at least) if some form of Government internventions had occurred earlier rather than allowing market forces to dictate.

The property market works in cycles, irregardless of whether you are in the US or Singapore and independent of the size of your country's land area. And our experiences of the past 8 or so years have taught us that the higher the prices go during a property market boom, the harder the fall once the property cycle turns.

And it certainly does not take a property crash of the magnitude seen in the US for Singaporean to start experiencing negative equities...

The Folks @PropTalk said...

Hi Anonymous (6/1/12, 10:22AM),

The wife and I are not as familiar with the other forms of investment that you have mentioned, except putting money in the bank. But from whatever little that we know, the government has definitely tightened regulations on financial investments after the "DBS High-Notes/Pinnacle Notes" debacle. Additional "safeguards" were also implemented within the banking sector (increasing of Tier 1/Tier 2 ratio, whatever those are).

So we think it's not just the property sector that the Government has been targeting. But since this is the most high-profile and generates the most attention usually, whatever decisions/actions get magnified many times over.

We are not saying that the ABSD is the most efficient/effective option to prevent a property bubble from forming - only time will tell. But private home prices are still rising and surpassed its peak (for mass-market homes) even after 4 rounds of property cooling measures implemented over the past 2 years. We reckon that more has to be done before it's too late and we feel that the ABSD imposed by the government is not as bad an animal that many perceived it to be.

But that's just us... :)

Anonymous said...

I hate to say this, but it was indeed the US GOVT who intervened in the US property market that led to the demise of the property market in US - do recall that it was Alan Greenspan who stoke the property bubble by reducing mortgage interest rate to a mere 1%, and the creation of agencies Freddie Mac & Fannie Mae. Hence, it does NOT always mean tat when govt intervene in any market, they are right & they wont create unnecessary bubble/crash. After all, govt are just humans who can and will make mistakes.

And although property does have a cycle, but sad to say, property prices will not be possible to go back to where they were say 20 years ago. Property prices will keep increasing abeit corrections now & then. You may think tat $1350psf is expensive now, but in 20 years time, we never know. After all, there is just ONE location, & if you like the location (near mrt, bus interchange, mall), you can't find any other alternative. Property is a LONG term investment, those who are able to hold will most of the time always gain.

The Folks @PropTalk said...

Hi Anonymous (6/1/12, 4:09PM):

Although some may blame the demise of the US property market on the two decisions by Alan Greenspan that you have pointed out, there are also others who believed that it was due to a failure on the US Government's part to regulate the mortgage market when they had the opportunity to.

Then again, the wife and I must admit that we do not know enough about the US subprime crisis so we probably should leave things at that.

While we do not expect property prices to revert and remain at the level of 20 years ago, recent history has shown that prices do fluctuate down to lower levels of previous years and stay put for long enough for potential buyers to enter the market at lower prices.

The residental price index was at 140 in 2000. It dropped below 120 between 2002 - 2005 and started rising again in 2006, almost hitting 180 at the peak of 2008 before dropping back down to below 140 in 2009 during the downward cycle. Although the price index is above 200 at present, it is not entirely inconceivable to expect prices to "correct" back to the 2009 level.

We agree that nobody knows what will happen in 20 years' time (we may all be dead!) and that people should go with their hearts sometimes (which we advocate, by the way, if it is for own-stay rather than investment). But do I really want to go in at $1350psf now, when most indicators point to the fact that the market may be turning from its peak, or should I stay put for just a little while longer, even if it means forgoing that ONE location? THAT is the question a buyer should be asking himself.

We have already made our own decisions, and yes, we are staying away from the property market for now. And by the way, we do not believe in the notion of "there is just ONE location"... :)

Anonymous said...

If prices do correct to 2009 level now, would you dare to buy? Or would you think prices might go down further? And did you buy any property during the 2008/2009 crisis? Point is, it is difficult to TIME the market & to withhold emotions such as fear & greed. As I've mentioned, property is and shd always be viewed as long term investment, & never overleverage. I guess you are hoping & waiting to buy at a cheaper price, & no one can fault you for that. All the best!

The Folks @PropTalk said...

Hi Anonymous (7/1/12, 2:12AM):
Matter of fact, we DID buy our last property during the 2008/2009 crisis. :)

Our (humble) experiences have taught us that you CAN actually TIME the market. However, trying to catch it at the highest or lowest point before the market starts to turn is almost impossible - something that we have acknowledged from onset and never tried to do. Maybe we have been lucky but the practice has served us rather well thus far. And yes, we wait (investment esp. in property requires patience) but we also do our homework rather than just hoping.

But we do agree with you on the "long term" and "overleverage" bits that you have mentioned.

Cheers!

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