Don't go on buying spree yet: UBS analyst

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Don't go on buying spree yet: UBS analyst

Jun 30, 2017

Rachael Boon


The local property market is seeing better days but do not go on a buying spree just yet, warned a top banker.

Although prices are down 11.6 per cent from the peak in April 2013, Mr Kelvin Tay, regional chief investment officer for UBS Wealth Management, noted: "There's some form of recovery kicking in, but please do not rush out to buy another 10 properties.

"There is not going to be a strong recovery where prices are concerned.

"Our macroeconomic fundamentals are still not great. We are not recovering at our median growth rate of 4 (or) 4.5 per cent but at 2.5 per cent. That's not a strong recovery."

He told a client forum that where unemployment is concerned, "we're not likely to see a dramatic reversal of 3.2 per cent that we have right now".

Mr Tay's remarks came after Monetary Authority of Singapore managing director Ravi Menon said earlier yesterday that easing property cooling measures now would send the wrong signal.

The Government made some tweaks in March, such as shortening the holding period for the seller's stamp duty.

Mr Tay noted: "The pick-up in transactions is healthy and is one of the reasons why the property developer stocks have gone up on the index, but can this be sustained?

"To expect another 15 to 20 per cent run is quite unrealistic."

He also noted that despite vacancy rates declining, they remain higher than the average 6.3 per cent over the past 10 to 15 years.

The supply of residential units will start to ease from next year, he added, "but inventory is still very high so don't get carried away by the fact that property prices have recovered".

The story is not pretty for rentals either, be it in the residential or office space.

"Office rentals are in even worse shape. Rentals fell 3.4 per cent in the first quarter and the vacancy rate is high at about 11.6 per cent," said Mr Tay.

"This goes for all areas, whether it's the central part of Singapore or the fringe areas, referred to as Grade A or B (respectively).

"Rentals are still coming off because the economy is growing at 2 to 2.5 per cent, so you're not going to see a lot of demand for property space in the next few years."

He noted an interesting trend of more technology companies moving into Grade A office space from the outskirts.

There is no joy in retail rents either.

Mr Tay noted: "You experience it first-hand. Go to Orchard and find Far East Plaza, Orchard Central, orchardgateway or Centrepoint with a lot of empty shop lots.

"There's no real upside.

"The Reits (real estate investment trusts) have done well this year, but be very focused on the quality of the assets."

He also warned that investors should be careful with Reits and added: "Is property a good investment to hold on a medium- to longer-term basis? We don't think so.

"You're better off investing in some other asset class."

[Laguna]

http://www.straitstimes.com/business...xtor=EREC-16-2[ST_Newsletter_PM]-20170707-[Too+soon+to+say+property+market+has+recovered%3A+Redas+chief]&xts=538291

Too soon to say property market has recovered: Redas chief


SINGAPORE - While there are signs that hint that Singapore's property market is trending up, it is still too soon to indicate that the market has finally turned positive and recovery has kicked in, Mr Augustine Tan, president of the Real Estate Developers' Association (Redas), said on Friday (July 7).

Mr Tan said the Government's tweaking of cooling measures, active participation by developers in recent Government Land Sales (GLS) tenders, with some sites sold at record prices, and some successful property launches have stoked optimistic sentiment in the first half of this year.

But he said weak macroeconomic fundamentals, anaemic global growth, geopolitical risks and rising United States interest rates were cause for concern.

"Our concern is if the prevailing 'bullish' appetite for residential land persists amid pending rising interest rate and weak employment prospects, demand will weaken over time and hasten the compounding effects of increasing supply and high vacancy," he told the audience at a seminar organised by Redas.

Singapore's weaker labour market, coupled with more modest wage growth and higher inflation, is expected to dampen sentiments going forward, he said.

He added that the inventory of private residential units will remain high, with a supply overhang of about 37,000 uncompleted units as of the first quarter of this year, of which nearly 16,000 units or 43 per cent are still unsold.


"At the current new private residential transaction volume of approximately 8,000 units in 2016, it will take around two years to absorb the existing stock, barring unforeseen circumstances. Furthermore, the Government has released a potential supply of 8,125 private residential units for the second half of 2017 through its GLS programme. Quite a number of the sites offered are in attractive locations," he added.

He also noted that the increasing interest in collective sales, with about 25 potential sites comprising some 5,300 units, will potentially boost supply further.

[Kelonguni]

Enbloc will boost supply? Enbloc remove units from the resales supply and adds on more units only after 4-5 years, new units that will cost much more than existing supply. Enbloc also gives firepower to existing owners of old properties.

There is insufficient supply for each person who wants to buy 10 though. At most five persons who want to share 1, and supply should be gone.

Those who can rush to buy 10, whatever you say will be pointless.