19/10/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

During the boom time when the country was flushed with funds, the property market was lucrative and speculators had a field day. We saw many of queuing up overnight at sales offices to ensure that they could grab a piece of the home ownership cake. In fact, during this time, many people made a quick buck by selling their position in the queue to overzealous speculators!

Under-counter payments to developers, multiple bookings by speculators, and fees for the transfer of bookings were the order of the day. Billboard makers, too, must have made a lot of money from housing developers, supplying them with “Sold Out” signboards! Indeed the “property mania” that was totally unbridled reached a feverish peak prior to the crunch of 1997 in the frenzy that took place in a free market.

The situation was similar to that of the stock market during the boom time. One just had to pick up any counter, then wait for the price to go up to reap a profit. Indeed the situation during a certain period was so good that we remember a remisier telling his clients that he would buy into a certain counter to get some profit to cover the cost of their lunch for that day! A player in the stock market stated (tongue in cheek of course!) that whatever goes up must go up further! What happened to both the stock and the property market since then is history.

The House Buyers Association has little concern about the stock market. Commercial stock counters are not one of life’s essentials as players go in purely for gains. Our question is: does the property market have to be similarly speculative as the stock market? We think not.

A home is the basic need of every family. Yes, like some other commodities, it can be an instrument for long-term investment but it should certainly not be allowed to become an avenue for speculative investment. Hot money and quick profits should not be allowed in the housing industry. Yet why does the government put a cap on the price of essential goods like rice, sugar, oil and a host of others but not for houses?

We believe that a home is as essential as those other items of daily requirement for which price control is stringently enforced. Yet, until the crunch of 1997, we had allowed the property market to develop into a highly speculative one.

Now we see the situation slowly building up again. Of course, a speculative environment favours the rich in that money makes money. But for the new entrants into the job market and for those who have yet to buy a house, the quest to own a home is likely to be elusive. Blessed only are those with wealthy parents who are able to assist them in their quest.

Money cannot just emerge from nowhere. Whatever money made by present day property speculators will be at the expense of future house buyers. If the situation is not regulated, we may end up with two likely scenarios, both of which are socially unhealthy.

On one hand we may see an unrealistic upward spiral of property prices and on the other, a bursting of the bubble and a repeat of the property overhang crisis. If steps are not taken to curb such a trend, we believe that the future will unveil more social problems. Not only that, but houses would go out of the reach of the average citizen.

In the second scenario, when the bubble bursts, we will face another (and perhaps more severe) bout of the fallout that we are currently recovering from. In a way, we can say that the present batch of aggrieved house buyers who are having problems with their abandoned houses are in reality the ones paying for the gains of the earlier speculators. We do not believe that this is a fair or healthy situation. And if the property market is left alone to develop we see the process repeating itself, leaving aside the economics of demand and supply.

We urge the government to take a hard look at the situation so that an essential item like a home does not become an item for speculators to exploit. If price control may be too drastic a measure, we believe a mid-point solution can be considered.

If the government can control the prices of other essential items, it must also consider putting in place some measures to discourage wild and frenzied speculation in the housing industry.