General Report

A Bubble That's A Gleam In Specuvestors' Eyes

2009-08-01T09:42:00.000+08:00

A Bubble That's A Gleam In Specuvestors' Eyes
Source : The Business Times, July 31, 2009

Mah Bow Tan's caution aimed at averting pain later, property market watchers say

Better to suck out the froth now than to burst the bubble later - that was what market watchers saw as the government's intention in warning against rash property purchases.

National Development Minister Mah Bow Tan said on Wednesday that there are signs of speculation in the property market, and the government will act if it overheats. He also urged home seekers to buy only within their means.

On the surface, the message may seem puzzling. By most accounts, speculators from the boom years - those who 'flipped' their freshly bought units in the subsale market for a quick profit - have yet to make a huge comeback. Price increases have surfaced only at some projects, while several others still registered price falls.

At CapitaLand's results briefing yesterday, group president and CEO Liew Mun Leong also observed that home demand is 'healthy', supported partly by home seekers whose estates were sold en bloc.

But dig deeper and the cause for concern becomes more apparent. Some industry watchers acknowledge that a group of 'specuvestors' is emerging. These are buyers who are prepared to keep and lease out their properties over the longer term, but are also open to selling them for capital gains if the opportunity comes along.

Although Singapore's economy is shrinking, several factors are working in specuvestors' favour. Notably, interest rates on bank loans are low, and more small apartments going for less than $1 million have become available. Many of them are also lucky enough to still have jobs, and some could have made a killing from the recent stockmarket rally.

These investors, together with genuine homebuyers, have raised market activity to a level that authorities feel is out-of-sync with weak economic fundamentals. The fear? That some would not be able to repay their loans if they lost their jobs, or if banks raised mortgage rates in the future.

'I have seen sufficient cases in my Meet-the-People sessions, where people have over-committed and now find themselves in difficulty,' Mr Mah recounted on Wednesday.

CIMB economist Song Seng Wun said in a note on Wednesday that Singapore's Q2 09 jobless rate is expected to cross 5 per cent. The unemployment rate for Singaporeans and permanent residents rose to 4.8 per cent in Q1.

Falling rentals would also test buyers' ability to support home loans, said Chesterton Suntec International's research and consultancy director Colin Tan.

So to several industry watchers, the government is sounding a note of caution, just in case. As a developer told BT: 'What if the green shoots turn brown?' The formation of a bubble - particularly on shaky ground - would require overt intervention and the consequences are unlikely to be pretty.

Take a look back at 1996, when the government introduced a surprise anti-speculation package to curb sharp spikes in private home prices. Tighter credit, a tax on gains and higher stamp duty caused sentiment to sink and transaction volumes to plunge. This is history that most would not want to see repeat itself.

The key is whether the government's words will help calm the buying frenzy at this stage. Here, views are mixed.

Some people may cool off, said Wheelock Properties (Singapore) CEO David Lawrence. 'I think (Mr Mah is) more focusing on the greedy people who overgeared, took on too many liabilities, and he's just saying 'be careful' . . . I think that's a reasonable message to the market.'

But some also think the buying will continue as long as money from savings, banks or stockmarket winnings is around. A developer also suggested that a few people might bring forward their purchases in anticipation of anti-speculation measures coming on. 'Singaporeans are a bit 'gan cheong' (panicky),' he joked.

At Optima, where people started queuing days before the showflat was due to open, developer TID has conducted a ballot for the 120 units planned for release. All units have been tentatively accounted for with prices starting from $790 per square foot. TID is a tie-up between Hong Leong Group and Mitsui Fudosan. A Hong Leong spokesman said that the balloting process helps to sieve out genuine buyers and the crowds have thinned. BT understands that there were already plans to conduct a ballot when a queue first formed, before Mr Mah spoke to the press on Wednesday.

Market sources also say that around 80 units have been sold at Centro Residences, out of around 110 released.

No Property Bubble Forming, Say Developers

2009-08-01T08:24:00.000+08:00

No Property Bubble Forming, Say Developers
Source : The Straits Times, July 31, 2009

They say buying frenzy hasn't reached point where Govt needs to intervene

PROPERTY developers are enjoying the surge in interest from buyers but they do not believe that speculation has reached a stage where the Government needs to step in.

Crowds had gathered at the 297-unit Optima showflat last night even though the public launch is scheduled for today. The developer TID held a ballot at midnight for about 300 genuine buyers who were queueing outside the showflat so they did not have to stay overnight. -- ST PHOTO: AZIZ HUSSIN

They also maintain that the prevailing economic conditions will begin to cool the buying frenzy and stop a bubble forming in its tracks.

'It's not a bubble, it's just a blister after the pain we experienced in the global financial crisis and it comes before a recovery,' said Cushman and Wakefield managing director Donald Han.

But some developers and industry insiders acknowledge that the comments from National Development Minister Mah Bow Tan this week are timely.

Mr Mah cautioned about a bubble forming, hinted at intervention if speculation got out of hand and advised buyers to tread carefully and not charge headlong into the market.

'The Government's message is quite clear: Don't rush as there is a lot of supply coming onstream,' said Sing Holdings chief executive Lee Sze Hao.

'It's good as a reminder so that people do not over-buy, over-chew. Developers do not want irrational exuberance,' said Mr Han.

A property consultant who declined to be named told The Straits Times: 'There shouldn't be panic-buying. Buyers may pull back a bit, not knowing whether the Government will step in or not. The fact is that the Government has opened its mouth; it can do things indirectly.

'But if the market hype continues to rise, they will have to do something.'

Many feel the hype, which centres on several condominiums, will likely be short-lived amid a recession.

'Inevitably, there will be speculative buyers, but they are for the smaller units...If the market is too speculative, you build up a bubble and that's not real demand,' said Mr Lee.

The market is seeing cashed-up investors ready to spend, which is different from speculators looking to buy another apartment to make a quick buck, he said.

The Government will do something only if there is a queue at every project and every unit is snapped up, he added.

The Real Estate Developers Association of Singapore (Redas) pointed out on Wednesday that only a selected few launches have been highly successful for various reasons.

Buyers have certainly been out in droves visiting the new showflats and buying new homes off the plan. Queues have been forming and developers have raised prices in response.

The interest was evident last night at Tanah Merah, where crowds gathered at the 297-unit Optima showflat although the public launch is scheduled for today.

The response was so strong that the developer TID held a ballot at midnight for about 300 genuine buyers who were queueing outside the showflat earlier so they did not have to stay overnight.

They had submitted cheques together with their application form by 9.30pm for the 120 units on offer at an average early-bird price of $790 per sq ft (psf), said a spokesman.

Another suburban launch, the 329-unit Centro Residences in Ang Mo Kio apparently attracted more than 80 buyers, even though it is priced at $1,150 psf and above - levels more suitable for prime or city-fringe projects.

Such enthusiasm for new projects, which is reminiscent of boom times, and the sudden spike in prices are likely causes for concern, said a developer who declined to be named.

Prices of some new mass market projects have gone above the peak 2007 levels, he said. 'But can the market sell 1,500 units every month in the next 12 months? I don't think so.

'The Government is observing, but it will cease to be overly concerned when things return to normal.'

CapitaLand chief executive Liew Mun Leong said at its results briefing yesterday that there is 'exuberance' in the market but no bubble. 'If it's investment driven, you could call it a bubble...but in our case, it is demand driven.'

He also said he would be the first to be worried if this frenzy is being driven by speculative demand.

He said there are buyers flushed with cash from collective sales in the recent property boom.

Mr Liew estimated there were about 13,000 home owners displaced by en-bloc deals from 2005 to 2007 and these buyers have ready cash of anywhere between $1million and $2 million each to spend.

Speculation Creeping Back Into Market: Mah

2009-07-31T08:49:00.000+08:00

Speculation Creeping Back Into Market: Mah
Source : The Business Times, July 30, 2009

Govt will act if housing market overheats; supply pipeline is strong

Speculation is trickling back into the property market and the government is watching the situation closely, National Development Minister Mah Bow Tan said yesterday.

The authorities will take action should the market overheat but home seekers should also be careful about making purchases, he underlined.

'I wouldn't say that there is excessive speculation at the moment but there is some element of speculation involved,' Mr Mah told the press after the topping-out ceremony for Tower One at Marina Bay Financial Centre (MBFC).

'Some of the practices and habits that you saw in the last property boom are beginning to come back.'

Queues have started forming outside some showflats and property agents are reportedly armed with blank cheques from clients.

Median prices have also gone up at some launches - by up to 7 per cent a month in a handful of cases. This has stemmed the fall in private home prices, with the Urban Redevelopment Authority's (URA) price index sliding 4.7 per cent in Q2 from a quarter ago - much less than the 14.1 per cent tumble it took in Q1.

The question, though, is why a buying wave is forming when economic waters remain tepid. The slowdown has moderated but a contraction is still on Singapore's books, Mr Mah said.

The official forecast now points to the economy shrinking 4-6 per cent this year.

It is therefore unclear if the buying momentum is sustainable, he said. 'I'm not so sure whether the demand is due to pent-up demand, or whether it is due to buyers responding to lower prices by developers or even to the current low interest rates.'

While it is premature to call it the start of a property bubble, the government is monitoring the market closely and will take 'whatever action is necessary', Mr Mah said.

He also urged home seekers to research the property market thoroughly and seek affordable units.

'Don't panic - because there is a lot of supply in the market.'

According to URA, there were 62,350 uncompleted private homes from projects in the pipeline at the end of Q2. Of these, 38,482 units were still unsold.

The government can also inject supply through the Government Land Sales (GLS) programme, Mr Mah said. It is considering whether it should reintroduce the confirmed list (suspended last October) for the first half of 2010.

Responding to Mr Mah's comments, the Real Estate Developers Association of Singapore (Redas) said that developers share a 'common desire to see a steady growth, for greater stability and sustainability in the property market'.

It also highlighted that not all property launches have been snapped up.

'Only a selected few launches have been highly successful for various reasons. This could also be a result of pent-up demand.'

Industry watchers saw Mr Mah's message as a signal against excess exuberance in the market. The move could have contributed to a fall among major property counters yesterday: City Developments lost 10 cents to close at $9.94, while CapitaLand shed six cents to $4.00.

Colliers International's research and advisory director Tay Huey Ying felt that there is 'genuine concern' about the sustainability of current demand. Some buying has been driven by accumulated wealth from the boom years and when the funds dry up, it will take strong economic fundamentals to generate new demand, she said.

But she also believes that the government will 'tread cautiously' when it comes to tempering market sentiment, because the pick-up has only begun and is fragile.

Developer sales of private homes started to recover in February - interest first poured into mass-market projects and gradually filtered into mid- and high-end ones.

Over the last month, for example, KOP Group sold 11 units at its luxury site The Hamilton Scotts, at prices ranging from $2,500 to $3,000 psf.

Across liquidity-flush Asia, several economists have flagged the risk of property bubbles forming. However, many do not believe that policymakers will aggressively tighten measures when economic recovery remains nascent.

Mah Sounds Warning On Property Buzz

2009-07-30T20:49:00.000+08:00

Mah Sounds Warning On Property Buzz
Source : The Straits Times, July 30, 2009

Government will take action if excessive speculation develops

THE Government will take 'whatever action necessary' to prevent excessive speculation in the property market, said National Development Minister Mah Bow Tan yesterday.

Mr Mah's note of caution comes amid a buying frenzy that has gripped the real estate sector in recent months.

He told the media on the sidelines of an industry event: 'I wouldn't say there is excessive speculation at the moment, but there is some element of speculation involved.

'Some of the practices and habits that you saw in the last property boom are beginning to come back, so I think we'll have to be careful.'

He also warned about a property bubble forming. 'Obviously it is not in our interest for such a bubble to form, because when it does, and bursts, which it inevitably must, then I think a lot of people will get hurt,' said the minister, adding that all parties concerned must ensure that such a bubble does not materialise.

'A little bit of speculation is inevitable in every market, but when it becomes excessive, then it is something that we should try to avoid.'

There are certainly signs of a red-hot market, including queues forming days before the launch of a new project.

Suburban condo Optima, next to the Tanah Merah MRT, drew lines snaking outside the showflat on Monday, though the unit does not open until tomorrow.

Real estate agents were also in the queues with blank cheques from clients.

Buyers at Ang Mo Kio were equally keen to put their money down at the 329-unit Centro Residences, reportedly paying $1,150 per sq ft, a price level typically seen in central districts.

Mr Mah said the Government was monitoring the market but added that it was uncertain if the activity is due to pent-up demand or generated by buyers responding to lower prices or low interest rates.

'It is in all our interest that the market is a healthy, sustainable one,' he said.

Property veteran Nicholas Mak, former head of research at Knight Frank, agreed that the key is sustainability of demand: 'Although now it seems it's a bit too much and too fast, with buying volume growing at an unsustainable rate.'

Speculation is on the rise, with the number of subsales in the second quarter at 940 compared with 412 in the first quarter of this year, he noted.

Mr Mah yesterday called on buyers to do their homework: Research prices, study information on upcoming supply and check data from the Urban Redevelopment Authority's website. 'Don't commit right up to the hilt...think about what if interest rates rise in the future, would you still be able to afford it?' he said.

He emphasised that there was plenty of supply in the pipeline: Of 62,350 uncompleted units of private homes, about 38,482 units remain.

The minister also announced that the confirmed list of sites in the Government's land sales programme could be reinstated if supply is needed.

The Real Estate Developers Association of Singapore backed up Mr Mah's comments that a bubble should not form.

It pointed out last night that not all the property launches have been snapped up. Only a select few have been highly successful for various reasons. This could also be a result of pent-up demand.
Labels: General / Reports

No Bubble Forming

2009-07-30T20:47:00.000+08:00

No Bubble Forming
Source : The Straits Times, July 30, 2009

THE recent exuberance in Singapore's property market could see prices creeping up some five to 10 per cent by end of this year and into the next, said CapitaLand's chief executive Liew Mun Leong on Thursday.

CapitaLand's chief executive Liew Mun Leong said the firm is waiting 'to pull the trigger at the right time' with regards to project launches and will be launching its Gillman Heights (left) site for sale soon. --PHOTO: CAPITALAND

At the moment, the demand from homes is in a 'healthy state' and it does not appear there is bubble forming yet, said Mr Liew.

'If people are buying homes only as investment tools, then it's a different story,' he said at the firm's results briefing.

The firm is Singapore's biggest property group by market capitalisation.

National Development Minister Mah Bow Tan on Wednesday said speculation is creeping back into the property market, even though it is not execessive at the moment, adding that the government is watching the situation closely and will take 'whatever action necessary' to make sure it does not overheat.

Mr Liew said the firm is waiting 'to pull the trigger at the right time' with regards to project launches and will be launching its Gillman Heights site for sale soon.

The developer paid $548 million for the condominium but a lengthy legal tussle spanning more than two years had delayed the redevelopment of the estate.

Meanwhile, the firm has seen strong buyer interest at its project, The Wharf Residence, in which 94 per cent of its 173 apartments has been sold, said Mr Liew.

Despite improved sentiment however, the global economic crisis continued to weigh on the firm's financial performance due to weaker market valuations.

CapitaLand posted a second quarter loss of $156.9 million, down from net profit of $515.2 million in the same quarter last year.

This is due to revaluations and impairment provisions primarily related to the Singapore office portfolio, real estate assets in Australia and the former Char Yong Gardens site in Singapore, said the firm.

Revenue also declined 27.9 per cent to $591 million in the second quarter.

For the first half of the year, revenue dropped 25.7 per cent to $1.08 billion compared to same period last year, while profit was a negative $114.1 million compared to $762.7 million in the same period last year.

Property Buzz Warning

2009-07-30T20:45:00.000+08:00

Property Buzz Warning
Source : The Straits Times, July 30, 2009

Government will take action if excessive speculation develops

THE Government will take 'whatever action necessary' to prevent excessive speculation in the property market, said National Development Minister Mah Bow Tan on Wednesday.

The topping out of the first tower at the Marina bay Financial Centre yesterday is a key step for the giant project, planned as an extension of the Central Business District. The tower will be complete next year and much of its office space has been pre-leased.
-- ST PHOTO: ALPHONSUS CHERN

Mr Mah's note of caution comes amid a buying frenzy that has gripped the real estate sector in recent months.

He told the media on the sidelines of an industry event: 'I wouldn't say there is excessive speculation at the moment, but there is some element of speculation involved.

'Some of the practices and habits that you saw in the last property boom are beginning to come back, so I think we'll have to be careful.'

He also warned about a property bubble forming. 'Obviously it is not in our interest for such a bubble to form, because when it does, and bursts, which it inevitably must, then I think a lot of people will get hurt,' said the minister, adding that all parties concerned must ensure that such a bubble does not materialise.

'A little bit of speculation is inevitable in every market, but when it becomes excessive, then it is something that we should try to avoid.'

There are certainly signs of a red-hot market, including queues forming days before the launch of a new project.

Suburban condo Optima, next to the Tanah Merah MRT, drew lines snaking outside the showflat on Monday, though the unit does not open until Friday.

Real estate agents were also in the queues with blank cheques from clients.

Buyers at Ang Mo Kio were equally keen to put their money down at the 329-unit Centro Residences, reportedly paying $1,150 per sq ft, a price level typically seen in central districts.