Extending more support for the property sector
Covid-19 is a totally unexpected event impacting the entire world. Whilst the Government has supported various sectors of the economy with measures, the property sector has been subjected to more controls like passing on property tax rebates, rent relief to tenants and Additional Buyer's Stamp Duty (ABSD).
The construction industry is also affected and timeline for completion of projects delayed as preserving lives take priority.
Compared to the previous few crises, the current housing market is more stable. Speculation (measured by sub-sales) is negligible at 1%. During the Asian Financial Crisis, people were flipping their queue number and option to purchase. Speculation accounted for a quarter of transactions in 1996. During the Global Financial Crisis in 2008, speculation was around 13%.
Furthermore, the Loan to Value ratio is at 75% for the first property loan and 45% for second property loan. The interest rate used for TDSR is 3.5% which is way below borrowing rates. This means that households are not exposed to high leverage.
The Government should consider allowing developers some leeway in meeting their project completion period and ABSD timeline. The lower sales volume is half of what is achieved under business as usual conditions. They can consider:
1. Extending the project completion period and ABSD timeline by 24 months for all projects
2. Extending the project completion period and ABSD timeline by
a. 24 months for projects 750 units and above
b. 12 months for projects below 750 units
This allowance should be applied retrospective to projects launched in 2018 to 2020 and developers should be relieved of liquidated damages to buyers. If project completion period is extended, this will also help buyers with their loan commitments as well.
As for Government Land Sales, the Government should consider suspending the Confirmed List for 2020 and shifting all sites to the Reserve List. This will help to ease the supply situation.
Overall, these measures will give some brief respite to everyone while the economy is gradually finding its footing.