In a recent blog entry, Minister for National Development Khaw Boon Wan stated that he would not hesitate to intervene in the so-called “shoebox” apartment market. Yet in the next sentence goes on to say that it would be hard to do so at present because the market in the heartlands is untested.

He goes on to describe a ferry and its passengers as a form of analogy, saying that the ferry may become overloaded in certain situations. If too many passengers crowd on, it may founder and sink, especially in shallow waters. He states that because the waters (corelating to the ”shoebox” market) are untested and unknown, it is hard for him to interfere. He would not want to think that he knows more than developers and investors (about the market).

We would like to bring his analogy one step further, however. If passengers are investors, and the journey over water is the market, then who and what are the ferry and ferry operators? Obviously, developers are ferry operators selling tickets to passengers wanting to get on the “ferry-wagon”. Using Minister Khaw’s analogy, would ferry operators have any incentive stronger than to just squeeze as many passengers on as possible, to maximise ticket sales?

I am sure we have all heard of countless situations world-wide where unregulated operators over-sell their ferry services, eventually leading to disaster. Moreover, the ferries in this analogy are one-off rides. Once you buy a ticket, the operator is absolved of all responsibility, whether the ferry meets with disaster or not. The operator has already made his profit.

This profit is based purely on how many passengers can be squeezed onboard the ferry. Without regulations and safety procedures, the ferry operator simply will not care if the ferry is overloaded or not. It is doubtful that the passengers in this analogy know much more about the waters ahead, than real passengers on a ferry. They put all their trust in the ferry operator, and blind luck.

Minister Khaw may not want to appear as knowing better than these developers and investors, but should he act as if he knows nothing? We can see a storm brewing on the horizon, yet there are thousands still lining up to grab a ticket, because taking a trip over water seems to be a very fashionable and popular way to invest money these days.

Right now, it all seems sunny, but when ferries start capsizing, who will be responsible for fishing these passengers out of the water in stormy conditions? The ferry operators? I think not…

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