Housing price caps not the way forward

Mr Ho Kwon Ping called for the HDB's role to evolve from that of a housing developer to that of a master land developer and price regulator ("The next 50 years of Singapore's economy", last Thursday).

Despite the high-minded intentions, having regulators set sales price caps, essentially price controls, is an economist's last resort and often worsens the situation. New York City's rent control regulation is a prime example.

Notwithstanding a housing shortage, enterprising private developers who cannot price their apartments above the mandated limit can get around it by either lowering the quality of their housing or charging various "miscellaneous fees" to offset the reduced prices.

In the first scenario, lower-quality housing tends to draw less affluent residents, affecting neighbourhood businesses in the process.

In the second scenario, regulators and developers might find themselves in a cat-and-mouse game of regulate-and-evade, wasting government resources.

The other question concerns secondary market participants.

Would the discrepancy between resale prices and primary regulated prices cause property "flipping", especially if the difference is wide? Or would the HDB's five-year minimum occupation period be expanded?

The sale, purchase and pricing of a residential unit are largely a contract between the buyer and the seller. Policies should facilitate the process, but not replace or distort it.

Alan Ng Zhi Yang

This article was first published on Nov 19, 2014.
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