Bringing down property prices

Recently there has been much talk about HDB (and general property) prices, and suggestions on how to bring them down. Some have come from a well-intentioned, good friend who now wants to keep a low-profile, so I won’t mention names, in case I get him into more trouble.

Politics is not only the art of compromise, but also the balance of interests. Few, if any policies, will benefit one group without harming the interests of another.

In this case, Singaporeans.

Let me touch on a few :

a) Buyers vs Sellers

Like the person-who-shall-not-be named alluded to, if one depresses brand new HDB prices, it will depress the whole property market. This is good for buyers, but bad for sellers and property owners.

It is false to imagine many of these to be foreigners. The home ownership rate in Singapore is close to 90%.

That means that falling prices will affect many Singaporeans.

Yes, these are paper losses, but negative equity may leave some unable to take a loan off their property. Or to re-finance mortgages.

Some retirees who hope to sell their homes, get cash and move to a smaller place will see their dreams dashed.

Also, those who are relying on rising prices to move up the property ladder. Their dreams will be dashed as well, and they too will get angry with the Government.

This is not unique to Singapore.

Every government has to balance buyers and sellers, and more importantly, young people with old people.

Swinging it too much one way will cause suffering the other way. Not easy to balance.

b) Investors vs Homeowners

In every country as well, when property prices rise, opprobrium is laid on property investors, who are then called speculators, or rent-seekers.

It is often said by socialists and communists, that this is an economic activity that generate no real value.

Let’s leave that aside and focus on the fact that every economic activity affects livelihoods of Singaporeans.

The whole property development sector relies on investors and speculators, not only home owners.

GDP from Real Estate in SIngapore was 14.8 billion.

A collapsing real estate sector will affect many Singaporean lives in construction, in development, in management, even in sales.

For example, there are 30,000 registered real estate agents in Singapore. Let’s say only 50% are active.

Mostly Singaporeans. So 15,000 families will get affected by a collapsing real estate industry. All who will get angry with the Government.

c) Landlords vs Tenants

Another problem plaguing many cities.

When rents rise, people attack the ’greedy’ landlords.

But if rents fall, or is controlled, landlords cannot pay their mortgage, especially when interest rates are rising.

Many of these landlords are Singaporeans, some who are retirees relying on rents as their only source of income.

Also, if nobody wants to rent out, then people who cannot buy have nowhere to stay.

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Let’s not view things from only one perspective.

We want to help young, new buyers own affordable homes.

But helping one group inadvertently disadvantages another.

Governing a country requires one to balance all interests.

Buyers get to vote. Sellers get to vote too.

Young people get to vote, so do old people.

And that’s why instead of big, hasty moves, governments try to calibrate and tweak.

These may not be enough for those who want to see big changes, but it is the reality in the art of compromise.

• CC