The property market is unlikely to crash as the Government acted quickly to prevent a huge bubble from forming, Deputy Prime Minister Tharman Shanmugaratnam said.
But he added that the overall movements of the property cycle are determined by market players. In a wide-ranging dialogue with DBS chief executive Piyush Gupta at the annual DBS Asian Insights conference yesterday, he said the Government had taken each step to temper over-exuberance in the real estate market knowing that what it did might not be enough, but also knowing that if it did too much, it might engineer a crash.
“But we started early and we avoided a huge bubble in the market. That’s why we won’t see a crash,” said Mr Tharman, who is also Finance Minister. “But I think a further correction will not be unexpected.”
He added: “I don’t think the cycle is over but the market determines the cycle. The Government has put in place rules, stamp duties and restrictions… but market players will determine where the cycle goes.”
In the hour-long dialogue, which touched on subjects ranging from Mr Tharman’s outlook on the global economy to his favourite things about Singapore – the multi-racial society, the food and the weather – Mr Tharman also expressed his optimism for the Chinese economy.
“Certainly amongst large economies it has the most complex economic challenges. It also has, in my opinion at least, the most capable economics team amongst the larger economies.”
China faces many challenges, he noted. As the Chinese leaders undertake the major task of transforming the economy into a market-driven one, Chinese leaders also have to contend with “legacy” issues. These include shadow banking, over-investment and high levels of credit that have built up in the wake of the 2008 global financial crisis. Nonetheless, he said China’s government is “closer to ideal than anything they’ve had in a long while, both in terms of capability as well as the ability to make decisions”.
Mr Tharman was also optimistic about India’s prospects. The first thing new Prime Minister Narendra Modi has focused on is “clarity and getting things done”, he noted. “Mr Modi is quite focused on streamlining approvals for projects, especially infrastructural projects, on reducing the number of agencies you need to go to at the federal and state level, and just getting things done.” This in itself is a significant improvement, Mr Tharman said.
Touching on productivity, Mr Tharman encouraged consumers to do more themselves, giving an example of how hotels in Sweden leave coffee pots on the table for customers to pour themselves.
“It’s the quality of the coffee that counts,” he said to laughter and applause.