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08-02-13, 16:44
http://www.todayonline.com/business/property/premature-dismiss-housing-market
Property
Premature to dismiss housing market
By COLIN TAN
-
01 February
New measures unveiled by the Government on Jan 11 to cool the housing market have been described by many industry watchers as the most comprehensive and harshest ever.
Hold on. Hasn’t this description been used to describe at least one other previous set of cooling measures? To put the most recent curbs into proper context, we are moving from “Harsh” to “Harsh+”.
Following the announcement, property analysts predicted developers’ sales to crash by up to 50 per cent and price falls of up to 25 per cent for the whole year.
Are we being too swift with our judgment calls, given that the previous six sets of cooling measures were effective for an average of only about five months?
Also, let us not forget that there are 11 more months in the year to go.
Unless we are saying that this time, it is different.
Reading some of the reports, it appears that the tipping point for making such a bearish call is the analysts’ perception that the measures are the harshest. Is it good analysis to rely on perception, even if it is the market’s widely-held view? Haven’t we learnt our lesson last year? Shouldn’t the tipping point be based more on fundamentals and less on perception?
Have we examined and established with some certainty the reasons why the market has been able to weather the previous six rounds of curbs, or are we still in the dark as to how it overcame the odds following the earlier measures?
What do we know this time that we did not before? Do we know the extent and depth of investment demand? Has anyone tried to measure this? What about first-timer or upgrader demand? Do we know how large a demand this group can potentially contribute or are we simply dismissing it as minimal?
Except for a Credit Suisse survey, there has not been any other attempt at gauging the level of demand in the market, investment or otherwise.
As I have previously commented in this section, there are two ways to read the results of that survey — a glass being half-full or half-empty. In a nutshell, the finding showed that only a small proportion of households intend to buy for investment in the near future. My take is that, although small, their absolute numbers can last the market for at least a couple of years more.
Also, I feel that the amount of liquidity in the market is immeasurable because Singapore has a very open economy. I have a sneaky feeling that it is probably much more than what we can ever imagine. It takes just a tiny fraction of overseas demand to be diverted towards Singapore to overwhelm the market here. After all, we are one of the very few places in the world still retaining an AAA credit rating.
We know the banks are flush with money, but the new rules restrict how much they can lend. To get a sense of how much money is floating around, we need only to look at the Certificates of Entitlement for passenger cars, whose prices are steadily making their way to the S$100,000 mark.
At the same time, funds that have been flowing out of Singapore searching for investment alternatives in the form of overseas properties may return because external circumstances do change. For example, in Johor Baru, the authorities are thinking of raising the minimum price of residential properties that foreigners can invest in.
If the Singapore market is so resilient, how then do we explain the discounts now being handed out at the new launches?
The housing market was starting to heat up in the last few weeks of last year. Given the upbeat sentiment, I would have expected every developer who could, and who was ready, to commit to a launch date for their projects.
A few of us in the industry were already anticipating another round of cooling measures but thought that the authorities would wait for the quarterly numbers to be confirmed by end-January before acting. Perhaps, the Punggol East by-election played some part in the timing of the announcement of the cooling measures.
Given the above situation, what do we realistically expect developers to do? I am sure those who could hold back have already done so. For those who could not, they cannot afford to have weeks of empty showflats while they wait for potential buyers to come to grips with the new measures.
For the buyers, it is the final price that matters. To my mind, the developers have no choice but to give discounts equivalent to the additional taxes, if only to maintain the buyers’ status quo.
Colin Tan is Head of Research and Consultancy at Chesterton Suntec International.
Property
Premature to dismiss housing market
By COLIN TAN
-
01 February
New measures unveiled by the Government on Jan 11 to cool the housing market have been described by many industry watchers as the most comprehensive and harshest ever.
Hold on. Hasn’t this description been used to describe at least one other previous set of cooling measures? To put the most recent curbs into proper context, we are moving from “Harsh” to “Harsh+”.
Following the announcement, property analysts predicted developers’ sales to crash by up to 50 per cent and price falls of up to 25 per cent for the whole year.
Are we being too swift with our judgment calls, given that the previous six sets of cooling measures were effective for an average of only about five months?
Also, let us not forget that there are 11 more months in the year to go.
Unless we are saying that this time, it is different.
Reading some of the reports, it appears that the tipping point for making such a bearish call is the analysts’ perception that the measures are the harshest. Is it good analysis to rely on perception, even if it is the market’s widely-held view? Haven’t we learnt our lesson last year? Shouldn’t the tipping point be based more on fundamentals and less on perception?
Have we examined and established with some certainty the reasons why the market has been able to weather the previous six rounds of curbs, or are we still in the dark as to how it overcame the odds following the earlier measures?
What do we know this time that we did not before? Do we know the extent and depth of investment demand? Has anyone tried to measure this? What about first-timer or upgrader demand? Do we know how large a demand this group can potentially contribute or are we simply dismissing it as minimal?
Except for a Credit Suisse survey, there has not been any other attempt at gauging the level of demand in the market, investment or otherwise.
As I have previously commented in this section, there are two ways to read the results of that survey — a glass being half-full or half-empty. In a nutshell, the finding showed that only a small proportion of households intend to buy for investment in the near future. My take is that, although small, their absolute numbers can last the market for at least a couple of years more.
Also, I feel that the amount of liquidity in the market is immeasurable because Singapore has a very open economy. I have a sneaky feeling that it is probably much more than what we can ever imagine. It takes just a tiny fraction of overseas demand to be diverted towards Singapore to overwhelm the market here. After all, we are one of the very few places in the world still retaining an AAA credit rating.
We know the banks are flush with money, but the new rules restrict how much they can lend. To get a sense of how much money is floating around, we need only to look at the Certificates of Entitlement for passenger cars, whose prices are steadily making their way to the S$100,000 mark.
At the same time, funds that have been flowing out of Singapore searching for investment alternatives in the form of overseas properties may return because external circumstances do change. For example, in Johor Baru, the authorities are thinking of raising the minimum price of residential properties that foreigners can invest in.
If the Singapore market is so resilient, how then do we explain the discounts now being handed out at the new launches?
The housing market was starting to heat up in the last few weeks of last year. Given the upbeat sentiment, I would have expected every developer who could, and who was ready, to commit to a launch date for their projects.
A few of us in the industry were already anticipating another round of cooling measures but thought that the authorities would wait for the quarterly numbers to be confirmed by end-January before acting. Perhaps, the Punggol East by-election played some part in the timing of the announcement of the cooling measures.
Given the above situation, what do we realistically expect developers to do? I am sure those who could hold back have already done so. For those who could not, they cannot afford to have weeks of empty showflats while they wait for potential buyers to come to grips with the new measures.
For the buyers, it is the final price that matters. To my mind, the developers have no choice but to give discounts equivalent to the additional taxes, if only to maintain the buyers’ status quo.
Colin Tan is Head of Research and Consultancy at Chesterton Suntec International.