[Singapore] A few good conversational pieces can make social lunches entertaining if not worthwhile. The hot topic is of course property. Depending on who you talk to, there is always a different angle to a given topic. OK, let's open up the topic a little wider to add more perspective and entertainment.
Norway Is Tycoon Next Target | 'take my money', it needs a home.
After his US$200 million resort and mountain park buying adventure in Iceland has been blocked, China property tycoon's dollars is screaming all the way to Norway for attention.
Sounds lucrative to me - 'paper currency for mountains'
Malaysia has bulk buying investment clubs to gain an edge in discounts and smaller down payments.
These days, some people evolve strategies to game the system. It is the norm and the theme of 'making your money work harder, smarter and come out of it a little better' has no expiry date.
As far as housing goes, the new refrain making its rounds everywhere in sales pitches is 'affordable'. There is no doubt about that. 'Look, my house just shrunk. Of course it has to be affordable. How else can I buy'.
There was a time when the authorities came out to say it is not building 2-room HDB flat any more, as public expectations have changed.
Given a few short years, how quickly this position has reversed. And now smaller and smaller homes seem to be the in thing. Japan and Hong Kong type housing, anyone?
So when we hear a little public hollering, the hue and cry just goes to tell 'the policy' is hitting its mark and that goes for housing too.
A new refrain from industry circle has just begun which is another way of saying that the pain inflicted on the property market is starting to tell.
With the property sector almost strait-jacketed, a property developer has metaphorised the residential property market to a stringed-up crab with all eight legs strung tight. No way to move, so to speak.
Seven rounds of cooling measure and one TDSR leaves little room for the property market to manoeuvre.
Though the TDSR, or total debt servicing ratio, is not represented as a property cooling measure, it is by far the most effective instrument in curbing momentum.
TDSR requires banks to thoroughly compute into account a borrower's total debt obligations which is set at a maximum of 60 per cent of a buyer's gross monthly income, before a new home loan can be granted. Total debt includes other mortgages and car loans as part of the deal.
The combined weight of a string of cooling measures which include a lower loan-to-value ratio, shorter loan term, additional buyer's stamp duty (ABSD) and seller's stamp duty (SSD) and the TDSR framework have finally succeeded to stall the residential market dead in its tracks, said industry analysts.
The question to ask is ‘Is the property market stabilising or is it going to go under? If so, by how much?'
The measures have curtailed transaction volumes significantly and led to a moderation in home prices.
Prior to the implementation of the TDSR, buying sentiment for private homes in particular were fleetingly cautious, only to move on in a frenzy, until the next successive cooling measure came along.
What is noticeable were short intervals of up and down adjustments in transaction volumes, with the lull coming immediately after each introduction and the upswing after developers introduced counter moves to offset the effect, in new launches.
However, ever since the TDSR framework was introduced on 29 June 2013, new home sales are down drastically across the board, including those in the mass market segment taking a major hit.
Observed the TDSR effect before and after its implemention.
Before the measures, developers shifted 9,950 private homes in the first half of 2013.
After the measures, developers sales were down about half, with 5,065 units sold
With the entire residential market affected, responses from industry leaders are coming in thick and fast.
Respected helmers in the banking and property industry have taken it upon themselves to speak out for the property sector and call for an easing of the cooling measures.
On the sidelines of the Real Estate Developers' Association of Singapore (Redas) Spring Festival lunch two weeks back, City Developments executive chairman Kwek Leng Beng suggested that the time may be ripe for the Government to mull over the lifting or tweaking of some of the cooling measures, in the light of concerns over the global economy.
DBS Bank chief executive Piyush Gupta predicted last week that home prices this year would fall by 10 to 15 per cent.
Shrinking volumes and price moderations, just when these measures are starting to bite will not prompt the Government to roll back the cooling measures at this point in time. The truth is a gradual deflation in prices may well be what the doctor ordered.
In fact the government may just have resolved one of the sticky issues most disgruntled Singaporeans have over high property prices and unaffordability issues.
Prices almost unchanged
The fall in private home prices has been small and shallow as Urban Redevelopment Authority data shows, dipping a mere 0.9 per cent in the fourth quarter of last year.
This was the first time that overall prices had fallen since the first quarter of 2012.
But look again, see this graph. Jan 2014, the average price has moved back up ever so slightly.
Although there is some merit in calls for a scaling down of the cooling measures, the latest numbers just show that it is still early days to make any rational move. Latest news portray good class bungalow market making a comeback and limited office spaces likely to boost rents this quarter.
Additionally, key drivers fuelling the property buying spree - like high liquidity, low unemployment, low interest rates, inflationary pressure and rising income among the more affluent - have not abated.
So while some developers are hurting, the evidence does not support an imminent lifting of cooling measures.
Addressing a looming over supply
Some analysts are concerned with a looming massive supply of public and private homes.
From 2014 to 2016, more than 97,000 new Housing Board flats will be completed. The private home segment, including executive condo will contribute another 77,000 units.
"It is not going to be easy calibrating the property market for a soft landing because the real estate market is imperfect on both the supply and demand side," said Savills research head Alan Cheong.
"The best one can do is to ensure that the macro variables like interest rates and policies are not either overly restrictive or loose. Within that framework, the Government should accept some degree of volatility."
The general concensus is that a 10% drop in prices over the next 12 months is generally accepted as not too excessive, given the run-up over the past five years.
But there is a Savills article that bucks the prevailing trend. See Savills report, “Savills sees private property prices rising 2%, not falling as expected”
The simmering issue of public housing has been significantly addressed by the housing authorities ramping up the supply of Build- To-Order flats to meet demand of first-time buyers at subsidised and ‘affordable’ prices, alongside with its various housing schemes introduced to make public housing even more available to a wider scope of buyers.
The ‘3 Generation flats in Yishun’ initiative and the ‘Parenthood Priority Scheme’ & ‘Parenthood Provisional Housing Scheme’ were public housing policies to support social objectives.
Monitoring the market
The Government is undoubtedly keeping a close tap on the property market, monitoring it closely to avoid being wrong-footed should there be a drastic change in market conditions
Industry watchers believe that the Additional Buyer Stamp Duty (ABSD) and Seller Stamp Duty (SSD) have somewhat achieved their objectives of keeping over-exuberant property investors and speculators at bay.
In fact it doesn’t pay to speculate these days, with runaway home prices, property supply overhang and a potential upward revision in interest on borrowings.
The punitive seller’s stamp duty with rates of up to 16 per cent imposed on home owners who resell their property within four years have effectively driven speculators out of the market.
Will the authorities loosen up on restrictions? All will be likely done in due course, as the market equilibrates itself.
However managing the property market is not an exact science because property is very much sentiment driven. When there is a crowd, everybody wants in. When no one is buying, nobody wants to make the first move.
This is where sales campaigns all over the world use sentiment-driven concepts to drive sales. Weave a yarn and form a web-cobbled trap. Watch your steps or be blithefully entrapped.
source: Straits Times