Property upturn based on true supply and demand: ERA

Its key exec officer says how long positive buying sentiment lasts depends on how fast prices rise

Fri, Feb 09, 2018

Lee Meixian


THE difference between the current property market upturn and the bull years of 2005 to 2007 is that the buying momentum is persisting in spite of the cooling measures designed to keep away speculation still in place.

This means that the market is "buying really on true sentiment, true supply and demand", ERA Realty's key executive officer Eugene Lim said at the 2018 ERA Asia-Pacific Business Conference.

The property agency, which has more than 6,200 salespersons and closed more than 4,300 private new home sales last year, said it has a runway of more than 20 project launches that it will be marketing this year, with the first launch slated for after Chinese New Year.

"It is like a runway full of planes just waiting to take off," Mr Lim said.

Some of the projects that are gearing up to launch after the festive period include Twin Vew at West Coast, Tapestry at Tampines and Rivercove Residences executive condominium at Anchorvale in Sengkang.

He added that a lot of people are asking how long the positive buying sentiment can last, and his answer is that it depends on how fast property prices run.

Private property prices rose 1.1 per cent for the whole of 2017, reversing the 3.1 per cent decline in 2016, according to figures from the Urban Redevelopment Authority. Because the price increase still seems gradual, Mr Lim believes that the recovery will last for a while.

"While some foreigners are coming back, we (don't see) them coming back in big numbers because the entire slew of cooling measures are still in place. Nothing has changed except for the shorter holding period of three years instead of four years for the seller's stamp duty."

On talk that mortgage rates may rise this year and dampen the property market recovery, Mr Lim said that banks here are still using a 3.5 per cent interest rate as a benchmark when gauging whether borrowers are able to service their home loans should interest rates rise to that level.

He believes this means that the market has already priced in an interest rate increase, at least up to 3.5 per cent, and he is therefore not worried about borrowers over-leveraging.

Other factors such as the relative affordability of Singapore property compared to the region and the absence of a capital gains tax in Singapore add to the appeal of purchasing real estate here, he said.

Comparing the current market upturn with the last bull run, he said: "The important change now is that there is no speculation in the market. The market does not allow for speculation because property prices are moving up slowly. So anyone who wants to play in the Singapore market has to adopt a longer-term view.

"We have crunched numbers in recent times and we see that the people who make money are no longer the people who hold short-term but those that hold maybe eight years, 10 years."

Furthermore, as investors now grow more convinced that the government will likely not be pulling back on its earlier-implemented cooling measures, they are also more assured to re-enter and "build (their) strategy around these rules[00:17:08]", he said.

ERA is the wholly-owned subsidiary of APAC Realty, which listed on the SGX Mainboard last September.

On Wednesday, APAC Realty announced the addition of Cambodia to the list of Asia-Pacific countries that it has the exclusive regional master franchise rights to. This boasts its network to close to 17,500 agents across 17 countries.

APAC Realty closed half a cent higher at S$0.995 on Thursday.