Property-related extracts: http://www.scribd.com/doc/44214510/Financial-Stability-Review-25-Nov-2010
Either you get the adrenalin rush as your heart beats race. Or you drop dead from heart attack ... you infarct (serially or acutely) as Gahmen pace-out the fart! To wit: Minister for National Development, Mr Mah Bow Tan, proclaimed in Parliament on 18 Oct 2010 that Gahmen will take "calibrated steps one at a time" so that they can "let the air out of the bubble".
A Bloomberg columnist, Mr William Pesek, Jr, attributed it as a "Freudian slip" by Minister Mah at the time (Business Times, 17 Sep 2009). Mr Pesek also commented that "Mr 'We Can't Detect Bubbles' probably never thought he could learn a thing or three from an economy of 4.8 million people. This week, Singapore's National Development Minister Mah Bow Tan unveiled measures to prevent excessive price swings in the real estate market." Now that the CEIC data up to 3Q 2010 is out, I wonder if Mr Alan Greespan is sniggering whilst Minister Mah polishes up on the fart-pacing technique.
With 20/20 hindsight, could I now say the Oct 2007-Aug 2010 policy measures were bumbles in bumping bubbles? Could I also claim prescience and gloat "I told you so" in various blog postings from 2007 to date?
Look at the above graph again. The excitement started in 2007. Singapore’s upswing was even SHARPER than Hong Kong’s (our green line cut over Hong Kong’s purple line). Continue to trace these two lines and it would show that our deep plunge became much STEEPER than Hong Kong’s when the crash came. In comparison, Korea was the most successful in keeping an even tempo after 2005 right up to the present (even the Korean graphical "mountain" from 2001 to 2005 had a much more rounded top than the sharp conical tops of the other countries' "mountains" in comparison).
So who misled Minister Mah? Could Minister Mah be taking more flak than he deserved whilst others (eg, MinLaw, MOF, MOM, MHA) took cover even though they were equally culpable by their action (or inaction)? Were Minister Mah and Minister Shanmugam NOT listening? [Mah has oversight authority for land supply from Government Land Sales; Shanmugam has oversight authority for land supply from en bloc sales with double whammy effects of instantly and simultaneously shrinking supply and spiking demand.] Could both Ministers even hear? I ask that because Minister without Portfolio, Mr Lim Swee Say,
As a "lesser mortal" (as a PAP parliamentarian labelled us plebians), my squawks do NOT matter (my first squawk was in 1999 and I re-started in earnest since Feb 2007). But even the MAS and the IMF sounded their alerts. Don't their squawks matter?
http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-c-pm-said-i-am-saying.html At around that time, MAS even conducted a survey entitled “Do you feel lucky, punk?” to suss-out property speculators' sentiments!
http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-c-pm-said-i-am-saying.html
As it happened, a month later in Apr 2010, the International Monetary Fund (IMF) also released a Global Financial Stability Report cautioning that "by some measures, housing valuations are stretched. Although the average price-to-income ratio has risen modestly, in some markets - notably, China, Hong Kong, Singapore and Korea - price-to-rent ratios are 'elevated'. It adds that many purchasers have been buying 'in the expectation of price appreciation, rather than simply for dwelling purposes'" - Business Times (22 Apr 2010).
http://www.scribd.com/doc/44277534/IMF-Global-Financial-Stability-Report-Apr-2010#
Who were responsible for the Private Property Price Index (PPPI) big yo-yo swings?
3. MinLaw/Singapore Land Authority (SLA) to blame. It is no coincidence or providence that the green line for Singapore in MAS chart 1.50 started the yo-yo gyrations only from 2007. The following collective sales chart documents the most frenetic bout of en bloc sales from 2006-1H 2007. Although en bloc sales are EXCLUDED from PPPI, I reckon that there is a correlation. Why? Because en bloc slosh (or slush) would consequently feed into the PPPI after due lag time, especially when most en bloc sales were typically driven by flippers on the Sale Committees. Slush monies from such flips took on their own momentum, spinning off into more new sales, sub-sales and resales (whether with en bloc potential or otherwise and exuberant Cash Over Valuations where displaced condo owner-occupiers downgrade to HDB post-en bloc). The only respite was from 2H 2008 to 1H 2009 due to the Great Recession with inherent real estate laggard effect.
4. MinLaw/SLA failure in land supply management. Land supply in Singapore comes from two sources: Government Land Sales and en bloc sales. Gahmen could tweak land supply in Outside Central Region (OCR) and parts of Rest of Central Region (RCR). But in its tool box for Core Central Region (CCR), especially for districts 9 and 10, Gahmen are helpless and hapless. Gahmen do NOT have any sizeable CCR residential land (other than the newly created Sentosa pocket) for it to directly affect supply side of economics.
MinLaw/SLA failed to consider alternative measures to indirectly influence supply and to ensure constructive destruction where redevelopments would be poised for renewable energy solutions in the coming decade, eg, creating en bloc quota by region and by type, incentivising plot amalgamation, etc. These suggestions were ignored by MinLaw/SLA (who incidentally didn't or still couldn't come out with other ideas to date) as it would have required MinLaw/SLA to break out of their silo mentality and cross boundaries to work with Ministry of National Development (MND), Urban Redevelopment Authority (URA) and Building and Construction Authority (BCA), and vice versa. Regrettably, I reckon that organizational structure issues and inter-ministry/agency competition prevented synergy whilst the singular common drive towards GDP Growth that determines GDP bonuses eroded institutional cross checks-and-balances. Double troubles, ugh?
That, I reckon, was how MinLaw/SLA failed to manage land policy in CCR and parts of RCR. Failed to preempt ... failed to react ... and still sitting pretty on their hands up to this day!
5. MinLaw/SLA failure with en bloc law. The Land Titles (Strata) Act (LTSA) governing en bloc sales was incepted in Oct 1999. Even after two rounds of legislative finetuning in Oct 2007 and Jul 2010, MinLaw/SLA have failed to meaningfully re-calibrate and revamp the structurally flawed law, typically taking two baby steps forward and one sweeping leap back. Hence:
http://singaporeenbloc.blogspot.com/2008/08/greek-mythology-themis-and-source.html
http://singaporeenbloc.blogspot.com/2010/06/fifa-world-cup-2010-when-people-with-no.html
- LTSA even made en bloc public tender process contradictory to the best practices enshrined in Government Land Sales ("GLS") with (i) back rooms for private treaty negotiations, (ii) side doors for private sale and (iii) amateur volunteers empowered as Sale Committee to sell-first-and-tell-later - basically, a legalized scam!
http://singaporeenbloc.blogspot.com/2010/04/fools-but-not-just-for-april-1st.html
http://singaporeenbloc.blogspot.com/2010/07/part-2-lady-gaga-is-too-stumped-to-go.html
- LTSA is not counter-balanced to "do right" by the Owners. For specific negotiation points and actionable measures at three critical milestones of en bloc process, scroll down to paragraph 2 in the following blog posting:
http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-2-whos-idiot.html
Although the Civil Service's mantra is that "no one has the monopoly of wisdom", MinLaw probably think they are the exception. Despite en bloc models of one-for-one (1-4-1) exchange in South Korea and Taiwan and more sustainably calibrated en bloc laws in Hongkong, MinLaw continue to be INCAPABLE of tapping (or UNWILLING to tap) other countries' best practices and customizing them to suit Singapore's context. Again, MinLaw are doing NOTHING.
- Upon demolition, LTSA unlocks land value for Developer-buyers (NOT extant Singaporean Owners), viz, post-en bloc:
For Owners: 2X Price or ½ Size
For Developers: 2X Price and 2X Size
For "Before" and "After" en bloc comparisons, please check out the numbers in the following bloc posting:
http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-3-whos-idiot.html
Similarly, MinLaw are INCAPABLE of publishing (UNWILLING to publish) comparative data pre- and post-en bloc (estate-by-estate with dates for en bloc vacant possession, redevelopment sales launch(es), expected/actual Temporary Occupation Permit) with broad breakdown of (i) land cost (segregated into en bloc aggregate purchase price, en bloc sales proceeds for each size/type of units, development charge/differential premium/stamp duty), (ii) construction/materials cost, (iii) financing/marketing/professional cost and (iv) sales proceeds for the number of units and sq m sold to date and the number of units and sq m unsold/to be launched to date. Such broad categorical breakdown would NOT compromise the sensitivity of competitive business data. To date, there is NO STATISTICAL ACCOUNTABILITY in MinLaw's web-site compared to the wealth of data available in URA's web-site. Yet again, MinLaw are doing NOTHING. Perhaps MinLaw believe that they not only have the monopoly of wisdom but they are also beyond accountability, eh?
- Upon redevelopment, LTSA caters for housing preferences of Permanent Residents/Foreigners for sleek and swanky condos in central locations at the expense of Singaporeans' sense of rootedness/community, viz, post-en bloc:
Displacements: Largely Singaporeans. Reason: PR/Foreigner deluge was recent. Business Times, 27 Nov 2010: Citibank economist Kit Wei Zheng said "Singapore's population rose by more than 800,000" during 2005-2009. Singapore's version of "rich IDPs" (Internally Displaced Persons - that's what they are called from Serbia to Somalia and beyond) would typically end up as Squatters, Refugees, Downgraders or Downsizers post-en bloc.
– Higher proportion of investor-owners (whether PR/foreign or local) than owner-occupiers - as recently commented by various property marketing experts (Today, 6 Nov 2010) and congruent with my previous posting about Casino Singapore turning into a nation of flippers (en bloc sale, sub-sale, resale). [I reckon data gaps and less astute statistical cuts camouflage the extent of flippers/investors - be it local/PR/foreigner, occupant/owner, private/public housing.]
– Higher proportion of PRs/foreigners for new purchases. Whilst the proportion of local owners will continue to be higher than PR/foreign owners in total, I reckon the proportion of new purchases by PR/foreign buyers will likely reinforce the SAME TREND shown in charts published nearly 3 years ago in Business Times (27 Mar 2008), as commented in paragraph 3 of the following blog posting [BTW, keen observers of Singapore know that statistics have a way of "never appearing again" if the picture painted is NOT what the Gahmen fancies]: http://singaporeenbloc.blogspot.com/2009/03/executive-legislative-judiciary-sans.html
Malaysians - 21%
Chinese - 20%
Indonesians - 20%
Indians - 14%
So that means the remaining "Others" category makes up a whopping 25%, ugh? Rich riff-raff from A-Z ... Arabs, Filipinos, Koreans, Russians, Uzbeks, Venezuelans, Zambians.
However, in my plebian opinion, PCP of 5 years from SLA's approval of residential en bloc purchase is still way TOO LONG and INCONGRUENT relative to such transaction's DOUBLE-WHAMMY IMPACT of deadly IMMEDIATE CORRELATION (viz, supply shrinkage and demand pumping), bearing in mind the additional 2-year window for Developer to dispose of all units. I'd suggest that for en bloc purchases, PCP should be SHORTENED to three years to ensure immediate redevelopment with PRE-disQUALIFICATION from future extensions or waivers granted by MOF/MND.
Reasons:
(A) One of LTSA's purported SECONDARY objectives was for higher land-use intensity, as proclaimed in Parliament in 1999. Therefore, there is NO JUSTIFICATION to allow Developer-buyers to landbank via en bloc purchases by displacing owner-occupiers/tenants. Going forward, Gahmen should NOT under-estimate Developers' new-found power to control supply and demand with their much strengthened holding power after 2009-10 historical record net profits (eg, delay substantive phased releases for sale after recouping land cost at very achievable break-even, deeper pockets to outlast regulatory impact and shortened market cycles, more intense en bloc predation, etc). The subtleties of the underlying game rules may have already morphed under the regulatory nose before the next Ha-choo splattering sneeze (or the next sulphuric Phoooot flatulent release of the bubble)!
(B) With the top-class efficiency of URA/BCA and other technical agencies, building plan approvals could be obtained within 7 working days from application. Hence, three-year PCP is adequate to obtain Temporary Occupation Permit.
(C) Past track record of PCP and sale disposal extensions by MOF/MND should no longer be available as future loopholes for en bloc purchases which must be pegged to a stricter regime because of displacement impact and purported national objective.
7. MOF/IRAS played scaredy-cat. In Jun 2009, IRAS held a Public Consultation on their proposed tax clarification on property trading (viz, the profit from the sale of only one property on/after 1 Jan 2010 will not be taxed if the individual owner has not disposed of any other property within 4 years prior to such sale). Whilst the proposed tax clarification would not eliminate review on a case-by-case basis upon tax-payer's appeal, it would likely boost IRAS' success rate in nabbing instances of tax evasion
Instead of being a case of "better late than never", IRAS is now a clown fast becoming a laughing stock with the benefit of hindsight. Whoever was the genius in IRAS who proposed the tax clarification must be feeling validated and vindicated. Whoever was the person instrumental in retracting the tax clarification ought to be sacked! Maybe it was the same person. Well, we will never know. The decision was probably a committee, a study team. No doubt, all of them will get their highest bonus ever for 2010.
Ditto for the question I raised as to why MOF did not see it fit to selectively and immediately withdraw and/or clawback the 2009 Resilience Package benefits from developers (eg, Job Credit Scheme instead of including this industry in its extension through Jun 2010) as their sparkling quarterly financial results were progressively released from 2H 2009 with triple-digit or high double-digit percentage increases in net profit. This poser was made in the following blog posting:
http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-1-whos-idiot.html
8. MND/URA/BCA bending backwards for Developers. It may be of interest to read the mind-boggling backflips that URA/BCA under the umbrella of MND did for the benefit of Developers - please refer to the following blog postings:
Paragraph 4: http://singaporeenbloc.blogspot.com/2007/12/in-coming-year.html
Paragraph 7: http://singaporeenbloc.blogspot.com/2010/03/foxes-outfoxed.html
Here's a recap of various policy initiatives (to be fair to MND, these were jointly announced with MOF and MAS if there is comfort in common misery). This would enable you to evaluate if our Gahmen were effective and/or timely or they were "too little, too late":
26 Oct 2007: Withdrew Deferred Payment Scheme.
BUT forgot about Interest Absorption Scheme (structurally different in terms of bank risk but effectively the same in terms of buyer's upfront commitment and eventually withdrawn two years later in Sep 2009) AND delayed effective date by pegging withdrawal to date of building plan approval (instead of, say, date of option to purchase, offer to purchase or sale and purchase agreement, whichever is the earliest, bearing in mind that this withdrawal was purportedly targetted at flipper buyers, not developer).
Nov 2007 blog posting - end of Section C:
http://singaporeenbloc.blogspot.com/2007/11/whats-next.html
Wrote to MinLaw/MND ... Dec 2007 blog posting - Paragraph 4:
http://singaporeenbloc.blogspot.com/2007/12/in-coming-year.html
BUT again delayed effective date by pegging withdrawal to date of building plan approval (instead of, say, date of option to purchase, offer to purchase or sale and purchase agreement, whichever is the earliest, bearing in mind that this withdrawal was purportedly targetted at flipper buyers, not developer).
14 Sep 2009: Prohibited Interest Only Loans.
BUT the question arises as to whether this type of product should even be allowed at the outset because such "balloon" loan structures are financially imprudent from the word "go", especially when CPF retirement savings are sanctioned for residential property purchases.
14 Sep 2009: Announced reinstatement of Confirmed List for 1H 2010 Government Land Sales programme after this was suspended in Oct 2008 in the aftermath of unprecedented meltdown and credit freeze globally.
6 Nov 2009: Announced Government Land Sales programme for 1H2010.
BUT deviated from the traditional norm of such announcements in Dec because Business Times reported on 7 Nov 2009 that “according to Urban Redevelopment Authority (URA) land sales and administration senior group director Choy Chan Pong, the market has been waiting for updates since National Development Minister Mah Bow Tan said in September that the confirmed list would be reinstated. 'Since people say there is some anxiety about housing supply, it's better to tell people now,' he explained.” [Yet again, another tell-tale sign of how close and responsive the regulators (eg, URA) are to the regulated corporates (eg, REDAS)!]
BUT made no distinction between borrowers with no or multiple outstanding housing loans until six months later in Aug 2010.
20 Feb 2010: Introduced Seller's Stamp Duty if property is sold within one year from date of purchase.
BUT because one-year holding period was so patently inconsequential relative to the typical three-year period for obtaining Temporary Occupation Permit, this was extended six months later in Aug 2010.
Wrote to MinLaw/MND ... Mar 2010 blog posting - Paragraph C-3.4(j):
http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-c-pm-said-i-am-saying.html
Let us pause here. After a lag of more than six months, the effects of the 14 Sep 2009
HDB resale flat price index: 154.9
URA private home price index: 174.2
Next, we patiently plod on and see if the 20 Feb 2010 slew of measures got more
HDB resale flat price index: 160.9 (up 6)
URA private home price index: 184.1 (up 9.9)
Oooops ... a little "pai seh" (awkward), eh? So they trotted out more bubble poopers as their weaponry on 30 Aug 2010. The day after the following additional measures were announced, a Jones Lang LaSalle property expert was quoted in press reports that "the current measures have been introduced a tad later than expected". [Again, keen observers of Singapore would notice that if the comment is even remotely critical, it would be quoted anonymously. This is probably indicative of outsiders' "fear factor" and/or insiders' "fragility factor" (as fragile as eggs that one has to handle with such care - Hmmm ... does that make them eggheads then?] My sentiments exactly, as a NON-industry expert, although "a tad" is a bit of a big understatement!
BUT given that (i) real estate investment is conventionally rated as "long term commitment", (ii) construction period is already three years and (iii) most people don't move house every three years, it makes one wonder if it would send a more representative signal with ten-year period on a declining tax scale. Eg, full SSD rate (1% for first $180k of consideration, 2% for second $180k, 3% for remainder) for first five years and a one-fifth reduction of full SSD rate for each of the next 5 years.
30 Aug 2010: Where there is one or more outstanding housing loan, (i) increased cash payment from 5% to 10% of valuation limit and (ii) decreased Loan-to-Value (LTV) from 80% to 70%.
BUT there are workarounds to qualify for lower cash payment and higher LTV, as the Chinese and Hongkong authorities already know (which explains the strict qualifying criteria China imposed on foreign investors in Nov 2010) and it is therefore unlikely that our Gahmen doesn't.
30 Aug 2010: Housing Development Board (HDB) tightened the pegs for non-subsidised public housing flats by (i) increasing the Minimum Occupancy Period (MOP) from three to five years before it can be available for resale or sub-letting and (ii) barring owners from concurrently owning both HDB flat and private residential property during such MOP. Also, private property owners who buy a non-subsidised HDB flat must now dispose of their private residential property within six months from date of HDB purchase. Ownership of private properties by HDB lessees will be allowed after MOP.
There are other factors at play (eg, data gaps and data integrity issues arising from SLA's
Paragraph 4: http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-1-whos-idiot.html
Paragraph 6: http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-3-whos-idiot.html
9. What's next? There is a lot of market chatter out there. More announcements are expected in upcoming Budget Day in Feb 2011, depending on, I suspect, (i) the impact of upcoming American Quantitative Easing exercises with carry trade implications, (ii) the extent of economic/financial woes of the weaker EU members and (iii) the astuteness and timeliness of other Asian governments in regulating their respective property markets and capital flows relative to our own.
It would be interesting to see if MAS concerns in the Financial Stability Review 2010 will be heeded: "current global conditions of flush liquidity and low interest rates may lead to upward pressures on domestic asset prices ... there is a possibility that transaction activity and prices could pick up again".
Ah Beng a la Forrest Gump noted as he sauntered off: "No need to si-mi 'brake'. Just make very the sure from beginning no bubber hor. Buay tahan ok!" Ah Beng, Ah Beng, you can't stand it? Do you think the rest of us can stand it?
