These are some excerpts from page 268 of the latest LKY book:
Q : What is your view on (regulation of movement of money in and out of the country)?
A : As a small country, the fewer regulations there are, the better ...
Q : Is there not a danger that, being small, we might be overwhelmed by massive inflows of capital?
A : Massive inflow will not overwhem. WHEN PEOPLE INVEST IN OUR COMPANIES AND OUR NEW BUILDING ESTATES, IT IS A SIGN OF CONFIDENCE.
Q : What about the risk of an asset bubble?
A : They stand to lose if they go too far, especially if too many of them are not buying property to stay in it but to make capital gains.
Q : So you are saying there will be a self-correcting mechanism?
A : In the long run, yes. Although there could be glitches.
Q : Will that not be TERRIBLY destabilitizing in the short run, from a political perspective?
A : For us, the choice is either we go global or we stay isolated. .. Our GDP per capita was US$500 in 1965. Today it is about US$52,000. We would not have reached that figure in 5 decades if we had not opened our doors. If we cut ourselves from the international economy, we will shrink.
Q : There is a concern that hot money flowing into properties might price Singaporeans out of the market.
A : We either have our borders open or we close them. Who is to say the properties bought by foreigners are overpriced or underpriced in 5 or 10 years? We leave it to the market to decide. They invest believing that it is a safe haven, but there are risks. If something happens, the value goes down. Properties are not liquid. You cannot cash in and cash out in an instant. .. In any case, we have made rules so that landed properties are not open to purchases by non-citizens, without prior approval. We have also imposed higher rate ABSD for purchases by non-citizens.
Q : It used to be argued that property prices should not be allowed to run too far ahead of salary increases, otherwise your average worker would not be able to afford .. That is true if the market consists primarily of domestic population. But when you open up the (market) to foreigners, you are delinking property prices from wages .. Is there not a danger ..?
A : BUT SINGAPOREANS HAVE ALSO MADE GREAT GAINS FROM THEIR PROPERTIES. If they believe their property is overpriced and that prices will eventually go down, the option of cashing out is available to them. You can sell your house, rent in the interim and wait for prices to fall. If you believe prices are going to stay up, then you hold on to it. It is ultimately a question of confidence in a particular country or in the political system ..
Q : But you can only unload if you already own property. The local new homebuyers have not such option.
A : For Singaporeans who do not yet own property, they can buy HDB flats at subsidised prices, IF THEY MEET HDB'S ELIGITILITY CRITERIA.
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In other words, what's your problem, Singaporeans? More foreigners, good what!! Either we open up, or be prepared to have your children work as maids overseas. High property price also good what!! What's your problem ??
Cassandra
TRS Contributor