wait a moment

Does the government want property prices to rise or fall? [short answer – neither]

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Sentiment in the property market took a dramatic hit when the government announced new cooling measures back in July. Stock prices of developers reacted dramatically – falling to levels not seen the lows of 2016.

In a small country like Singapore – understanding government policy is key as they control the land bank as well as dictate legislation that directly controls the market.

National Development Minister Lawrence Wong gave a timely speech at the REDAS (Real Estate Developers’ Association of Singapore (Redas) as he explained the thinking behind the cooling measures at the anniversary dinner of the developers’ body on Thursday and I think his remarks are quite instructive.

Key Points from Business Times Article (Link) with my Comments

He also reasoned that had the authorities not intervened, private home prices this year are very likely to have exceeded a 10 per cent increase, and may be even gone up by up to 15 per cent.

Again, the impetus for the government’s intervention is pretty clear. The en-bloc wave had swept up the entire country – and it really did seem the entire Singapore was up for sale.

The government was clearly worried that property prices would continue escalate given the positive momentum behind it.


“We will not take a hands-off approach to the property cycle. I don’t think any responsible government should do so.”

“Instead, we will do whatever we can to prevent property bubbles from forming and to minimise exuberance in the market,”


Something absolutely critical that investors in Singapore must always bear in mind. We don’t live in a market dominated by free market thinking.

The government has made clear time and time again that they will intervene if necessary to temper the ups and downs of the property market if it sees a fundamental reason to do so. More on that in a moment.


He emphasised that the government’s aim is not to bring property prices down but rather to have a steady and sustained property market where prices move broadly in line with income growth or fundamentals.


Probably the most important point in the speech.

The governments policy is to temper the property market – not to destroy it. A large part of our nations wealth lies in property.

Ergo, a sudden dramatic decline in property prices would lead to negative repercussions – a negative wealth effect whereby citizens feel much poorer from a decline in their largest wealth holding.


“We are already seeing significant headwinds in the external environment, with trade, with global economy slowing down, with interest rates likely to go up. On top of that, within our domestic market, more supply is coming on stream.”


In other words, the government is choosing to intervene because the picture painted by investors and developers were too rosy. I find it hard to disagree with this and with hindsight, their actions have proven to be very prudent.


Final Comments:

Despite much naysaying about the future of property prices – I am much more sanguine about its future. The government has made clear it is comfortable with property prices that move in line with the fundamental growth of the economy i.e. real growth in salaries.

One thing which is probably on the governments mind are upcoming elections. The bruising election results from runaway property prices in GE2011 is still fresh on their mind and it is a lesson they will not forget anytime soon.

It is worthwhile noting that ever increasing property prices are not good. Hong Kong – a place where I spend much time is probably reflective of what I think is terrible policy that has its key concerns completely wrong.

At the same time, if the economy does take a hit (as we should imagine it will as some unforeseeable time in the future), the government has plenty of cooling measures it can unwind if needed to stimulate the market – something it has done in previous recessions.




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