"It's been proved so often: don't mess with market forces. Your original intention might have nasty unintended consequences"
I complete agree as amply exemplified by the subprime loan crises.
"While the housing and credit bubbles were growing, a series of factors caused the financial system to become increasingly fragile. Policymakers did not recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. These entities were not subject to the same regulations as depository banking. Further, shadow banks were able to mask the extent of their risk taking from investors and regulators through the use of complex, off-balance sheet derivatives and securitizations.[24] Economist Gary Gorton has referred to the 2007–2008 aspects of the crisis as a "run" on the shadow banking system.[25] The complexity of these off-balance sheet arrangements and the securities held, as well as the interconnection between larger financial institutions, made it virtually impossible to re-organize them via bankruptcy, which contributed to the need for government bailouts."
And having dare to ignore the consequences of the neolibreral credo - don't mess with market forces, poor Singapore is now fast becoming the Venezuela of South East Asia. I give it another six months before we start seeing Singaporeans fleeing that city-state in huge numbers. And what follows is the reason why.
“In an economy that is growing in nominal terms at 3% to 5%, it is not sustainable to have property prices increasing at double digits,” said Ravi Menon, managing director of MAS. Singapore government firmly restrains property prices The moderation of house prices over the past years is the result of deliberate government policy.
Before and after the global economic crisis, Singapore’s property market surged. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% inflation-adjusted).
The Singapore government sensibly took steps, and when these turned out to be not enough, took further measures.
October 2012 it limited the mortgage term to 35 years, and lowered loan-to-value (LTV) ratios to 60% for loans longer than 30 years (or loans stretching beyond age 65). This was only the first of 10 rounds of property-market cooling measures. Seller’s stamp duty (SSD) was then introduced on owner-occupied housing sold within a year of purchase. A little later, the stamp duty was revised upwards, with sales of owner-occupied houses taxed sold within a year of acquisition taxed at 16% of sale price. Then the holding period was increased from one year to four years. In subsequent rounds, LTV ratios were lowered and minimum cash down payment increased. Despite these measures, property prices kept surging. In the sixth round, new residential loans were capped at 35 years, with existing loans over 35 years facing tighter LTV ratios. In the seventh round the government revised the additional buyer’s stamp duty (ABSD), increasing rates from 5% to 7% for Permanent Residents’ (PRs) first residential property purchase, and Singaporeans’ second residential purchase. This resulted in a 23.5% decline in sales transactions within a year, but prices continued to surge till the end of 2013.Eighth, ninth and tenth rounds of market-cooling measures followed.These market-cooling measures have been effective, as evidenced by the 10% decline in property prices from 2014 to 2017."
