With the appointment of a new Minister in charge of housing (yes, the more accurate term is ‘National Development’ but we all know that really means housing), things are definitely going to change. Of course, the wheels were already put in motion before General Elections 2011 (GE2011) was over when then-Minister for National Development, Mr Mah Bow Tan annouced that his ministry would look into revising the income ceiling for HDB flats (which was implemented in 1994- so obviously, either Housing has become less affordable since then or most people’s wages haven’t gone anywhere since then)

Also, in the resale sector, it’s become apparent that the intended cooling measures haven’t been working as much as the Government would have liked it to because the HDB resale (see here) and Private property prices (see here, graphic here) have resumed their upward march. So it doesn’t take a genius to figure out that a new guy on the job would want to take measures that are hard and fast.

However, there is the impending tsunami of housing supply coming onto the market (see Part 1 and Part 2 of this great article) to bear in mind. Of course the powers-that-be know of the supply overhang coming onto the market, they aren’t fools and if your humble blogger could make such inferences, that can do much better.

Therefore, in my view, there are 2 scenarios most likely to happen:

1) Home Prices Dip

– The government acknowledges the groundswell that many people are unhappy over the high housing prices (let’s leave the question of whether prices are really high because after all, as the recent results of GE2011 showed, it’s the perception that matters) and therefore, moves to ‘cool’ prices further. Housing supply floods the market at about the same time and prices come down.

– Now, this is the key determinant of the housing price direction. Given that one of the grounds for unhappiness in the recent GE2011 was also due to the high influx of foreigners living in Singapore, will the Singapore government (having been given a fresh mandate) seek to alleviate people’s concerns? Or will they charge ahead nonetheless by allowing more foreigners to reside on our shores? If they take the back-pedal approach towards immigration, then I’d say that housing prices are in for a dip. After all, we can’t depend on overseas investors to shore up demand and besides overseas investors aren’t going to put their money in an investment that has a likelihood for losing money.

2) Home prices stagnate

– The more likely scenario, in my opinion, is that given the supply coming onto the market, the government will continue to let more foreigners in, in an attempt to keep property prices stable. We can’t simply increase our own home-seeking population in the span of 2-3 years and therefore, that leaves us with one choice- import our population.

– The worry on the ruling government’s mind, of course, is which is the lesser evil for their re-election bid in GE2016? If home prices dip, almost all voters will be affected as our home ownership rate is one of the highest in the world. However, if we allow more people on the island within the next 2-3 years, will our other infrastructure be able to support them? As it is, our public transport system has come under a lot of fire for not being able to handle the loads. The new MRT lines (Downtown lines) aren’t coming online till 2015 or so. Therefore, the ruling government might take a gamble with this step.

As it turns out, I’m not the only one with views on the matter. Lucky Tan has a piece (here) on why property prices in Singapore are likely to fall soon. I think I’m a little more optimistic.

On an end note, note that I don’t think housing prices are likely to continue going up in the near future (beyond 2012) so for all those people who bought recently or prior to the Global Financial Crisis in 2007, I wish you the best of luck.