Waterfront apartments in Singapore.
Unless residential property prices plunge dramatically, the government may not lift the cooling measures, reported Singapore Business Review citing a Maybank Kim Eng report.
“Singapore households have $840 billion of capital, or 209 percent of GDP tied up in residential property. This has resulted in lower disposable income, which has impeded consumer spending and muzzled entrepreneurship. Another less obvious implication of property ‘overinvestment’ is that home price appreciation fuels wage inflation, reducing Singapore’s cost competitiveness,” the report said.
While income returns have been meagre in recent years, residential properties remain a popular investment class, with investors setting aside the bulk of their savings in the hope that they can one day buy a house once prices eventually drop.
The report noted that Singapore households are sitting on a “cash pile of $374 billion, which has surged since property curbs were rolled out in 2009.
“We believe that residential properties are sucking in surplus capital, with an increasing number of Singaporeans buying their second and third properties. This is economically non-productive.”
Maybank believes the economy will be better off if Singaporeans use this idle capital elsewhere, such as improving consumer spending and boosting entrepreneurship.
Singaporeans have to be weaned from their long-held aspirations of becoming landlords earning passive rental income, while investors should let go of their belief that investment properties are the best asset class to own, it said.
“To ensure Singapore’s long-term survival, we believe the government should not remove (the) property cooling measures. A sustained and gradual easing of property prices is necessary to restore business competitiveness, in our view. If part of the monies that has been locked away in anticipation of a bottoming of the property cycle flows towards productive assets or even consumption, we believe entrepreneurship can be enhanced and thrive,” added Maybank Kim Eng.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
