Minister Khaw and the Local Property Market

A reader had asked me for my views on MND Minister Khaw Boon Wan's performance thus far and about the local property market.  In response, I must say that I am severely challenged in the area of property.  Not being a property owner and having no intentions to buy one any time soon, nor having the means to afford one given the sky-high prices (without become a debt slave), I must say that I have paid scant attention to this market.

With those caveats in mind, here are some of my general observations:

1. The mess left behind by Mr. Mah is a big one, and so it will take Mr. Khaw quite a bit of effort to clean up.
2. Mr. Khaw has rightly warned Singaporeans that the property market may suffer severe setbacks.  This is the right thing to do, given that sentiments seem to be similar to those near the 1996 market top.
3. I think Mr. Khaw is putting in genuine effort trying to give the people what they want, which is an important part of democratic politics.  That said, what they people want may not always be what's right or optimal, given perceptual biases and the general lack of rational decision-making processes.
4. Since I believe that the market is due for a correction, and that the global energy situation will have severe negative impact on our economy in the next few years, I have to wonder if building more flats to address the current supply-demand imbalances is the right thing to do.  But I won't blame Mr. Khaw for this - he is just giving the people what they want.
5. When peak oil's effects become apparent, I believe that there will be an outflow of non-citizens and this will create a big overhang in the property market.
6. I also wonder whether more fundamental changes to HDB housing policy is required, given that most young people, upon buying property, will be debt slaves for a long time, not having the means to save for their retirement.  One has to wonder whether that is sustainable.
7. Perhaps citizens should consider whether it is time to relook at the desire to form nuclear families, given our severe land constraints.  While having less foreigners will help improve things in the short-run, we have to look at whether or not as a society, we have massively misallocated resources into the property sector.  Is it time for us to discover the joys of living with an extended family, not only as a means of economising on housing expenditure, but also perhaps as a remedy to the growing litany of social ills?
8. If the government really wants to bring down prices, one way would be to further tighten monetary policy.  As far as the interest rate environment is concerned, Singapore is still in a negative real interest rate situation.  In such a situation, it is natural for speculative bubbles to form, given that saving money is unproductive in terms of protecting one's purchasing power.
9. We have to remember that our ability to cash out of our properties is dependent on future demand.  Since we are not reproducing ourselves, and since we don't want more immigrants, it is irrational to think that the property market's current underlying fundamentals can be sustained in the long run.  I believe I have written about this issue in earlier blog posts.

My apologies for the lack of organisation again.  As I have mentioned before, property is not something that I pay much attention to.