IT seems unlikely that the government will offer property developers any reprieve in this month's Budget, industry watchers believe.
The Ministry of National Development (MND) was very direct in its reply on Feb 29: "It is too early to relax the measures now. Doing so could result in a market rebound."
This was a written reply to a Member of Parliament who had asked if MND would consider reviewing the cooling measures by removing the additional buyer's stamp duty (ABSD) for Singaporeans, but retaining it for foreigners.
In recent years, the Real Estate Developers' Association of Singapore (Redas), too, has been lobbying for a review of the measures.
But Redas president Augustine Tan told The Business Times that the association has not sent the government any Budget wish list, unlike other trade associations, as it does not do so as a habitual practice.
Rather, it prefers to meet with the authorities such as MND and the Urban Redevelopment Authority (URA) from time to time to voice its concerns and engage them in discussion.
Asked about flak that the association has received each time it asks for a review of the measures - which some people consider a good policy to keep home prices in check - Mr Tan pointed out that Redas has lately stopped lobbying for specific actions to be taken by the government. This is a change from what it used to do in yesteryear.
Rather, Redas has now begun to emphasise that it is on the same side as the government in desiring stability in the property market, and does not want a continued slowdown to have negative spillover effects on the broader economy.
So at the Redas Spring Festival lunch last month, while Mr Tan spoke about the looming consequences of qualifying certificate rules and the ABSD on the property sector, his central message was: "There is therefore an urgent need for action to bring stability and ensure a soft landing to prevent further damage to the fragile economy."
Singapore's economy grew 2 per cent in 2015, moderating from 3.3 per cent in 2014.
Private-sector economists polled by the Monetary Authority of Singapore (MAS) expect gross domestic product (GDP) to expand 1.9 per cent in 2016.
The property and construction sectors account for a significant one- tenth of Singapore's GDP (4.8 per cent and 5.2 per cent respectively), according to 2015 data.
In terms of manpower, property and construction take up more than 15 per cent (2.5 per cent and 13.7 per cent respectively) of the total workforce, including foreigners.
Last year, less private industrial and residential building activity caused growth in the construction sector to moderate to 2.5 per cent, from 3.5 per cent in 2014.
This led the Ministry of Trade and Industry (MTI) to flag that poor private-sector construction demand, among other factors, would probably retard the economy in 2016.
Yet, MAS seems quite certain that any impact of a property slowdown on the economy will be contained.
In its macroeconomic review last October, it said that Singapore's GDP growth is more affected by external factors, with export demand accounting for about three-quarters of total demand.
It also found that the correlation between the cyclical components of residential investment and GDP is "weak" and "statistically insignificant". In fact, at times when GDP growth was up, the contribution of residential investment to GDP growth actually went down, and vice versa.
Residential investment refers to the construction of public and private homes.
The share of residential investment in overall GDP has fallen from a peak of 20 per cent in 1984 to around 6.5 per cent in 2015.
The impact on the construction sector can also be controlled, going by precedents in the past where the government has used public construction (of infrastructure, for example) as a counter-cyclical stabilisation tool during periods of weak growth.
It did this in its FY2009 Budget during the global financial crisis, spending S$18-20 billion on MRT and road transport networks, and bringing forward S$1.3 billion of construction projects to boost activity.
MAS added that it was also not worried about the structural displacement of workers in the construction sector as housing demand falls.
Singapore's construction workforce is generally able to adjust flexibly to changes in demand, without a discernible impact on local employment.
One reason is that manpower in the construction sector mostly comprises a transitory foreign workforce, which is subject to quotas tied to ongoing construction projects. So in a downturn, they can be laid off without any marked increase in resident unemployment in the housing sector.
Economists interviewed by BT agree that any ripple effect that a sustained property market slowdown has on the economy will not be too severe.
DBS economist Irvin Seah said even if property prices were to fall 15 per cent from the 2013 peak (that is, a further 7 per cent in 2016), it would still not be enough to spark a negative chain effect across the economy.
Property prices have done worse; they crashed 45 per cent in the 1997-8 Asian financial crisis and 25 per cent in the 2008-9 global financial crisis.
"While there are risks in the near term of a technical recession, an outright full-year negative growth type of recession as in previous crises is unlikely at this juncture," Mr Seah said.
Low interest rates will also help to cushion the economy. "Despite interest rates gradually inching up, the absolute domestic rates are still lower than the historical average levels of about 3 per cent," he added.
Mizuho economist Vishnu Varathan said that it was difficult to quantify the impact of a further softening in the property market because of the number of moving parts involved - such as interest rates and global economies. Suffice it to say that a 15 per cent drop from the 2013 peak could move the GDP needle.
"It will cause considerably more discomfort for households and businesses, especially developers. But this may not be a dire type of crisis."
He noted that in the three years prior to the 2013 price peak, wages did not keep pace with the surge in housing and bridging loans. So a 15 per cent correction will end up hurting home owners more from the disproportional effect of leverage.
This is due to the double whammy of the drop in value of the collateral (that is, the property) and the increased financing burden, as wages will not be able to fully adjust for the leverage effect. Many loans here are collateralised by property.
This article was first published on March 18, 2016.
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