http://www.todayonline.com/business/...market-booster
Property
Cooling measures or market booster?
By COLIN TAN
19 April
Based on the new private home sales data for March, the seventh round of the Government’s property market cooling measures must definitely qualify as an own goal, as a colleague put it. Instead of cooling the market, the latest curbs unveiled in January actually boosted it as buyers turned up in droves.
In October last year, following the announcement of the sixth round of curbs, I wrote in this column that the Government’s cooling measures were in danger of losing their credibility.
To date, we have had seven rounds of such measures. In the sixth round, where home loan tenors were curbed, show flats were packed the day after the announcement with prospective buyers unfazed by the new measures.
I expressed the fear then that this loss of credibility may soon unleash a new wave of buyers into the market, namely those interested in buying but who had hitherto stayed prudent and waited on the sidelines for the numerous sets of cooling measures to work their effect.
I did not have to wait long. The market quickly worked itself into another frenzy towards the end of last year, prompting the Government to introduce the seventh round in January.
But in what must be the most bizarre response to any set of cooling measures introduced so far, show flats were kept open long into the night on the day of the announcement as buyers rushed their purchases to avoid the impact of the new measures. Confirming that the unusual market behaviour that day was not an anomaly, new private home sales for March were sent flying to the moon after the Chinese New Year lull in February.
An astounding 2,793 units were sold last month, the highest monthly new home sales volume since such data were compiled and released by the Urban Redevelopment Authority in 2007. To get a feel of the pace of buying, this is equivalent to an annual volume of over 33,000 units — which will more than double last year’s sales figure.
Fuelling the latest burst of buying was the anxiety that more cooling measures might be imposed, which may make it harder to buy a property even if you are a first-time private property purchaser or an upgrader.
As one such buyer put it, the window is fast closing. For first-time investors in particular, they feel that if they do not act now, they may not be able to purchase a home in the current cycle. They will then have to wait for the next cycle or have to risk paying higher stamp duties and settle for a shorter or smaller home loan.
With the seventh round of curbs failing to cool the market, policy makers may have to go back to the drawing board and ponder whether more of the same will hack it.
In another development this week, the Government announced it would be closing the tenders for three Executive Condominium site sales on the same day. The idea is to help moderate tender bids and hopefully future property prices. I feel this move is long overdue.
Some analysts have argued that the bids may not necessarily come in lower and that developers with greater financial muscle could have a clean sweep of the sites. Yes, it may not make a difference to bigger developers, but can they afford to put in record-high bids for all three sites? This would risk tripling their exposure in what is already a toppish market.
As for the clean sweep that could occur, what is stopping such a move from already happening under the current system of closing tenders one after another? And do not forget that sites awarded at the same time are likely to have closer or similar launch dates.
This would lead to greater competition in the market and less scope to push prices as high as the market will bear. So let us not knock it. It took the authorities a very long time to come around to it, just as they did with shoebox units. I feel that the chances are very high that this move will help moderate prices.
ABOUT THE AUTHOR:
Colin Tan is head of research and consultancy at Chesterton Suntec International.