Staying cool in the hot seat

	Straits Times: Sun, Jun 03
You could say he asked for it. When Mr Khaw Boon Wan volunteered for the hot seat at the National Development Ministry, it caused him many sleepless nights initially. Housing had emerged as a highly emotive topic in the General Election in May last year and he was under pressure to fix the problem fast. So why did he volunteer for the job? Mr Khaw tells Think he could have stayed on at his old job in the Health Ministry but chose not to. 'Housing was politically hot and PM (Lee Hsien Loong) was looking for a new person to take a fresh look... I had some ideas on how they could be addressed. So I volunteered. Somebody has to do it.' A year has passed and Mr Khaw says he now sleeps 'much better'. The reason is a calmer, more stable housing market in which queues for first-time buyers of HDB flats have shortened significantly. Even second-time home buyers have been allocated more flats - 15 per cent of new flats launched, up from 5 per cent. Price growth in the resale market has also slowed. But some sticky facts remain. Home prices are still at historic highs. Some home buyers chafe at having to shoulder loans that they will take 30 years to repay, so as to own a home. The situation is causing many to ask if this is the new equilibrium for Singapore's housing market. Mr Khaw takes the long view on the situation. He says: 'I've gone through many property cycles and at the height of each one, everyone worries that it will remain that way. But what goes up must come down, so I'm more relaxed.' For him, what matters is that prices are no longer spiking. He admits that the gap between income growth and home prices has widened. Resale HDB flat prices, for example, have risen by more than a third since 2009, but wage growth for most has lagged far behind. So the gap must narrow, says Mr Khaw. The question is how? 'You can do it the drastic way in a sharp correction which will cause a lot of hardship, or gently do a 'soft landing',' he says. 'That's what we've been trying to do, and so far, so good. But I'm keeping my fingers crossed because the global economy and liquidity are beyond our control.' Part of his arsenal to control prices is to tackle supply and stabilise new flat prices. But the HDB's ambitious building programme of over 50,000 new flats in two years has a flip side - the danger of oversupply. Analysts have cautioned that a glut of homes in 2014 to 2015 may cause a price correction in both private and public housing markets - something that happened in the late 1990s, when the HDB built tens of thousands of flats according to the number of applicants on its waiting list. This demand vanished overnight when the Asian financial crisis struck in 1997, leaving the HDB with a large unsold stock - with high holding costs. This risk, says Mr Khaw who joined politics in 2001, is one that the Government 'must always be mindful of' and that is why it is important to closely monitor the market and not be complacent. 'It is both a science and an art. And we also need a lot of good luck,' he said. For example, if the global economy collapses because of the euro zone crisis, demand could evaporate quickly and many units will be unsold. 'This is why I regularly remind Singaporeans about buying houses within their budget, and assuming a normal interest rate, not the current unreal interest rate. Prudence will avoid problems.' He also revealed for the first time that once the HDB clears the current backlog of demand for homes, it is thinking of keeping an inventory of unsold flats. That was a move some industry watchers called for previously, to enable better management of demand. 'Some stock of unsold flats is a good thing to have... but it will cost us money,' says Mr Khaw. While the Government will do its part to keep prices in check, the minister also wants home buyers to do their part - by buying flats of a size and price commensurate with their income level. On complaints that buyers have to shoulder 30-year home loans, he says: 'If your income level affords you a three-room but you insist on getting a five-room, then of course you may even need 40 years.' He noted that HDB had extended the maximum loan repayment term from 25 years to 30 years in 1997 because the public had demanded it. It all boils down to whether home buyers 'want to burden' themselves unnecessarily, he says, adding: 'We can only offer advice. It's your decision.' He hopes couples will buy a first home that suits their income. When their salary goes up, and if the economy is doing well, the home value should also appreciate and 'that escalation helps you to be able to afford a larger unit' - or even upgrade to a private property, he says. That is what he himself did. He started off in a Bedok three-room rental flat, then bought a small 30-year-old terraced house of 900 sq ft, and then upgraded to a semi-detached house where he now lives. The bottom line, he says, is young couples should not worry. 'I can understand that they worry a lot, seeing prices, day in and day out, keep going up... but just as interest rates will not always remain low, they should not assume that prices will continue to go up.' And even as many are looking for ways to cash in on the property boom, he sees it as his job to urge prudence. 'I know when the party is hot, party-poopers are not popular. They get booed. But it is my duty to sound the alert. It is an occupational hazard to be jeered at sometimes, for doing what is right. Fortunately, I believe most Singaporeans appreciate the reminder. From time to time, they e-mail me to say so.' [e-mail] TOMORROW: Khaw Boon Wan on the 'new normal' Costly but good move Some stock of unsold flats is a good thing to have... but it will cost us money. On HDB keeping an inventory of unsold flats Duty to sound alert I know when the party is hot, party-poopers are not popular. They get booed. But it is my duty to sound the alert. On his urging prudence in a property boom Soft landing better You can do it the drastic way in a sharp correction which will cause a lot of hardship, or gently do a 'soft landing'. That's what we've been trying to do, and so far, so good. But I'm keeping my fingers crossed because the global economy and liquidity are beyond our control. On narrowing the gap between income growth and home prices Source: The Straits Times
»  Housing crunch easing, says Khaw	Straits Times: Sun, Jun 03
The Government hopes to ease home prices in a 'gradual manner' even as it guards against policy changes that lead to major price corrections, National Development Minister Khaw Boon Wan said last week. After a year as housing minister, Mr Khaw believes recent policy moves to ease the public housing crunch are working but 'we are not out of the woods yet', he said in an exclusive interview with The Sunday Times. In the year since housing emerged as one of the hottest issues in the general election in May last year, queues for new HDB flats have shortened and prices of new flats stabilised. New HDB figures show an 85 per cent success rate for first-time home buyers in the November 2011 launch of new flats - up from 45 per cent in May last year. Some 5,800 couples became eligible to buy new flats after the monthly income ceiling - unchanged for 17 years - was raised from $8,000 to $10,000 last August. These measures have helped ease worries among young couples buying their first home. To prevent demand running ahead of supply again, the HDB is thinking of holding an inventory of unsold flats, Mr Khaw revealed. 'Some stock of unsold flats is a good thing to have. It will cost us money but it's a cost that we may need to bear,' he said. A decision will be made when the backlog is cleared. Panic among home buyers in recent years - when property prices hit historic highs - was 'totally understandable'. But he gave this assurance: 'Having gone through many (property) cycles, I can only advise and remind that things don't go in a straight line.' There is now more certainty of supply, with HDB's launch of a record 50,000 build-to-order (BTO) flats in two years. Mr Khaw said: 'Over time, hopefully we can ease (prices) down. This depends on interest rates and the global economy.' The Government's job is to manage this transition gradually and it must not cause major corrections in the market as this would be 'very painful' for home owners. Mr Khaw also points to 'signs of stabilisation' in home prices. The pace of growth in resale flat prices has moderated - it inched up 0.6 per cent in the first quarter of this year, the slowest since 2009. Cash premiums paid for resale flats, known as cash over valuation (COV), have started to ease. Even private home prices in the central region are moderating, with the exception of mass market 'shoebox' units of 500 sq ft or less. That is a sector Mr Khaw is watching closely. 'Overall, we are not yet out of the woods. But I am beginning to see the light at the end of the tunnel,' he said. Mr Nicholas Mak, SLP International research head, noted that based on an analysis of BTO flat prices in five HDB estates, prices of new flats in the majority of new projects have risen marginally by 1 per cent or 2 per cent since the May 2011 General Election. In contrast, the price movement of BTO flats corresponded more closely with the movement of resale HDB flat prices, which rose more than 10 per cent in the year before the general election. As for COVs, ERA Realty's Mr Eugene Lim said ERA's transactions showed average COVs eased from a high of $38,000 in August last year to about $27,000 last month. PropNex chief executive Mohamed Ismail said the risk of oversupply in the near future is still low as pent-up demand means new units are being absorbed. 'More broadly, the stabilisation of the property market will take at least a couple of years. It's not going to be something you can achieve overnight,' he said. [e-mail] Staying cool in the hot seat: Think Source: The Straits Times