Tag Archives: price

DPM Tharman: Property Crash unlikely

The property market is unlikely to crash as the Government acted quickly to prevent a huge bubble from forming, Deputy Prime Minister Tharman Shanmugaratnam said.

But he added that the overall movements of the property cycle are determined by market players. In a wide-ranging dialogue with DBS chief executive Piyush Gupta at the annual DBS Asian Insights conference yesterday, he said the Government had taken each step to temper over-exuberance in the real estate market knowing that what it did might not be enough, but also knowing that if it did too much, it might engineer a crash.

“But we started early and we avoided a huge bubble in the market. That’s why we won’t see a crash,” said Mr Tharman, who is also Finance Minister. “But I think a further correction will not be unexpected.”

He added: “I don’t think the cycle is over but the market determines the cycle. The Government has put in place rules, stamp duties and restrictions… but market players will determine where the cycle goes.”

In the hour-long dialogue, which touched on subjects ranging from Mr Tharman’s outlook on the global economy to his favourite things about Singapore – the multi-racial society, the food and the weather – Mr Tharman also expressed his optimism for the Chinese economy.

“Certainly amongst large economies it has the most complex economic challenges. It also has, in my opinion at least, the most capable economics team amongst the larger economies.”

China faces many challenges, he noted. As the Chinese leaders undertake the major task of transforming the economy into a market-driven one, Chinese leaders also have to contend with “legacy” issues. These include shadow banking, over-investment and high levels of credit that have built up in the wake of the 2008 global financial crisis. Nonetheless, he said China’s government is “closer to ideal than anything they’ve had in a long while, both in terms of capability as well as the ability to make decisions”.

Mr Tharman was also optimistic about India’s prospects. The first thing new Prime Minister Narendra Modi has focused on is “clarity and getting things done”, he noted. “Mr Modi is quite focused on streamlining approvals for projects, especially infrastructural projects, on reducing the number of agencies you need to go to at the federal and state level, and just getting things done.” This in itself is a significant improvement, Mr Tharman said.

Touching on productivity, Mr Tharman encouraged consumers to do more themselves, giving an example of how hotels in Sweden leave coffee pots on the table for customers to pour themselves.

“It’s the quality of the coffee that counts,” he said to laughter and applause.

– See more at: http://business.asiaone.com/news/property-crash-not-likely-tharman#sthash.ZbgarvB1.dpuf

Government says it is still too early to roll back property cooling measures

According to the Ministry of National Development (MND) yesterday, it is still too early to roll back property cooling measures. It said that despite home sales have decreased, prices have remained relatively stable.

The moves to rein in property prices included extra stamp duties to curb speculative buying and the total debt servicing ratio framework which was introduced a year ago.

MND noted that private home prices had surged 60 per cent during the most recent market upswing that began in mid-2009.

The MND’s comments came as prominent developer Kwek Leng Beng warned of a potential impact on Singapore’s reputation as a global city, and called for a review of the policy measures.

The National University of Singapore’s Residential Price Index out yesterday showed that prices of resale homes climbed 0.8 per cent in May from April, after falling for nine months. The Urban Redevelopment Authority’s flash estimates for private home prices will be out today.


Is it the time to enter the property market?

In today’s Business Times (10 June), the headline news is about the current property market in Singapore. Titled ” Dark Condos shine light on rising vacancy”, the article depicts the excess capacity building up in the private housing market, evident with some condominium developments completed six to 12 months ago, or even longer, point to significant vacancy.

A host of factors were cited, such as

1)    strong investment demand for real estate after the global crisis,

2)    escalation in private home completions of late, and

3)    slower expatriate inflow.

Vacancies are set to climb and rents fall in general. Suburban locations, where most of the supply is, will be the worst hit.

After the global crisis, investors sought refuge in trusty assets such as real estate. Fuelled by the low interest rate environment, some took to hoarding property at new launches and are hence not bothered whether they can find a tenant after taking possession of their units, say observers. Some high net worth foreign buyers treat their Singapore property as a holiday home and leave it unoccupied most of the time.

But there are others who leave units vacant because they are not able to find tenants. Competition for tenants is increasingly intense, with both demand and supply factors at work. On the demand side, changes in labour policies have slowed down the flow of foreign professionals into Singapore while on the supply side, there is a higher-than-average number of private home completions.

Tthose who bought for rental returns would find themselves in a more competitive leasing market today, where units in mediocre locations would be more difficult to lease and therefore remain vacant for a longer duration, especially during this period of strong supply.

Due to low rents, some owners have left their units empty, especially the cash-rich set who did not take any housing loan for their purchase. A vacant unit may deteriorate faster but leasing it out at a low rent may not be feasible since it will incur high maintenance costs. High-end properties have the finest finishes, so maintenance and repair costs may be hefty. Selected fit-outs and finishings such as tiles may be of limited collection and difficult to replace if it is damaged by the tenant.

Developers left with unsold units, especially in the slow high-end segment, also contribute to vacancies as these projects are completed. Other factors may also be at play in specific projects. But the overall trend of rising vacancies and softening rents is clear amid climbing private home completions since last year.

The 13,150 private homes that received TOP last year was 27.3 per cent above the previous year’s 10,329 and 40 per cent above the past 10-year average of 9,395. The figure for Q1 this year was 4,114 and the full-year tally is expected to hit 17,138, based on estimates submitted by developers to the Urban Redevelopment Authority. Thereafter, completions are slated to climb further to 21,738 next year and 26,252 in 2016 before easing the following year.

URA figures show that the pool of vacant private homes has risen to 19,284 at end-Q1 2014 from 18,003 at end-Q4 2013 and 14,532 at end-Q1 2013. The islandwide vacancy rate rose to 6.6 per cent at end-Q1 this year from 6.2 per cent a quarter earlier and 5.2 per cent at end-Q1 2013.

The latest quarter’s increase could be due partly to families that had yet to move to the new homes that were completed in Q1.

Rising vacancies have been accompanied by softening rentals. For the first time since Q3 2009, URA’s private home rental index contracted in Q4 last year. The index dipped 0.5 per cent quarter-on-quarter, followed by a further 0.7 per cent drop in Q1.

Prediction of drop in the rent ranges from 4-10 per cent. Against the backdrop of the large supply, some landlords could become more flexible on their rents, particularly after the removal of the vacancy tax refund with effect from Jan 1, 2014. Landlords now have to pay property tax on their vacant units and some may accept a lower rent and have the unit rented out instead of leaving it empty.

Competition for tenants is likely to be more intense in suburban projects, as the bulk of completions last year as well as the potential supply pipeline are in Outside Central Region (OCR). URA’s Q1 rental index for non-landed private homes in OCR was down 2.3 per cent from a year ago. This compares with a decline of 0.3 per cent for Core Central Region (CCR) and a rise of one per cent in Rest of Central Region (RCR).

Of the 67,507 homes under construction at end-Q1, about 59 per cent were in OCR, 22 per cent in RCR and 19 per cent in CCR. Four years earlier, of the slightly over 36,000 units under construction, the respective shares were 30, 36 and 34 per cent.

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