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The Straits Times
Mar 24, 2012
Resale property market slow down


By Jessica Cheam , Daryl Chin

PROPERTY firms and agents are tapping other avenues to remain in business now that Singapore's once-booming resale market - for HDB flats and private homes - has taken a big hit from the Government's cooling measures.

Fresh estimates from agency bosses show the number of resale deals in both markets for the first quarter dropping significantly compared to sales done last year.

But the slowdown in these markets has fuelled activity in others. Sales are soaring at launches of mass-market condominiums. Buyers snapped up a record 3,138 new private homes last month, including executive condo units.

To get a slice of the action, property agencies such as PropNex and ERA are increasingly looking for direct deals with property developers to market new launches, which also offer their agents an alternative revenue stream.

Agents are also counting on the buoyant commercial and industrial sector, which is not affected by the recent cooling measures. Many of them have diversified into selling such units to make up for lost income from the dampened interest in the residential sector.

Some have also gone into subletting HDB flats to those - many of them foreigners - who would rather rent than buy now.

The Government, in its latest round of cooling measures last December, slapped a 10 per cent additional buyer's stamp duty on all foreigners buying homes, effectively killing a significant source of demand in the private property market, especially for high-end homes.

The Housing Board has also offered a record number of more than 50,000 flats in two years, and raised the monthly household income ceiling to $10,000 to allow more to bid for new flats instead of turning to the resale market.

Data from property agencies OrangeTee and ERA Realty put the number of HDB resale deals at 4,000 to 4,500 for January to mid-March.

This is almost 30 per cent lower than the 6,228 deals in the first three months of last year, and 24 per cent less than the 5,921 in the fourth quarter of last year.

OrangeTee's research and consultancy head Tan Kok Keong said the large number of new flats and recent moves by the HDB to set aside a larger number of flats for second-time buyers have reduced demand in the HDB resale market.

As a result, the cash premium paid above a flat's valuation, known as COV or cash-over-valuation, has also dipped.

ERA and PropNex said, based on their transactions this month, that the median COV across all flat types and towns was about $25,000 - lower than the $35,000 in the fourth quarter of last year.

ERA key executive officer Eugene Lim said, however, that the drop in COV has lured some buyers back into the market, with more units being sold this month compared to January.

Over in the private property market, ERA has spotted a 30 per cent dip in resale transactions for the first three months to date, compared to the fourth quarter last year.

'There's a mismatch of expectations between buyers, who expect prices to come down and hence make low offers, and sellers who have no urgency to cut prices,' said Mr Lim.

PropNex chief executive Mohamed Ismail pointed out that buyers may also opt for new units because they need to fork out only the initial downpayment - 20 per cent of the purchase price, or higher if the buyer already has an existing home loan.

The buyer can take the next two to three years to shop around for a loan while the project is being completed. Buying a resale unit means having to take a hefty loan immediately.

Sales in the commercial and industrial sector have heated up. Mr Ku Swee Yong, chief executive of International Property Advisor, said such investments are attractive as interest rates are still low and these units do not come with the tight restrictions imposed on homes.

PropNex real estate agent Casey Ng, 46, who has been brokering home deals for the past 10 years, diversified into selling commercial and industrial units at the start of this year.

He took up a course on the commercial market recently, and in the past week alone sold two properties in an industrial park in Woodlands Avenue 12.

'It's a different ball game as buyers are not as emotional about a place as compared to residential units,' said Mr Ng.

Smaller agencies, which have also felt the brunt of the slowdown in the resale residential market, are changing course too.

Mr David Huan, key executive officer of Rainbow Cottage, said his 60 agents now focus on the HDB rental market, where the number of units approved for subletting per year shot up from about 15,000 in 2009 to 26,000 last year.

He attributes this to the relaxation of subletting rules in recent years and the reduction of the minimum occupancy period, meaning more flats will qualify to be rented out.

'There might not be enough for us to sustain in the resale market, so we have to concentrate on where the possible business avenues might be,' he added.

jcheam@sph.com.sg

darylc@sph.com.sg
It's strange that buyers are snapping up MM aka mickey mouse units despite the unknowns in future.
It's even stranger than buyers lurve new private homes as opposed to less than a decade old with lower ppsqft.

What's strangest is the fact Watertown and Bedok Residences, units located at suburbia area could hit $1400sqft, even with the fact they r integrated developments with MRT at doorstep.

$1400sqft isn't a cheap value, it can open up to alot more districts than one thinks.
Oh well...
$1400 psf at bedok/watertown is very impressive for the developers! Big Grin

developer win, buyers OH NO!! Tongue
(24-03-2012, 10:20 AM)arthur Wrote: [ -> ]$1400sqft isn't a cheap value, it can open up to alot more districts than one thinks.

Yes, it is not cheap today. But 10years down the road, it may be cheap.



I think today's (27Mar12) latest CNN news on U.S. home prices should serve as a wake-up call for existing owners/investors of private residential properties in Singapore and would-be buyers.....
http://money.cnn.com/2012/03/27/real_est...ahoo_quote
(27-03-2012, 10:23 PM)dydx Wrote: [ -> ]I think today's (27Mar12) latest CNN news on U.S. home prices should serve as a wake-up call for existing owners/investors of private residential properties in Singapore and would-be buyers.....
http://money.cnn.com/2012/03/27/real_est...ahoo_quote

Hi dydx,

While I do share your sentiments regarding the apparently high level of property prices in Singapore with respect to median income, somehow I feel the situation here may be different (yeah I know, famous last words!). Would it really be comparable to look at USA versus Singapore? After all, Singapore has a lot of "hot money" flowing in from China and the region hoping to invest and get better returns. This, coupled with the super low interest rates now, seem to combine to be able to sustain the lofty prices.

Do you recall what happened during the last housing bubble in 1996? What were the factors which caused it? I understand it was the AFC in 1997 which caused the bubble to burst, and there was a 6-7 year bear market in property after that.

So far I've been waiting for a crash or correction since 2008-2009, but not only has it not come, bullish sentiments continue to reign and the private property and HDB resale index continue to make new highs (w.r.t. 1998 levels).
The present mess in the U.S. home and home mortgage markets came about because many people/parties (whether U.S. citizens, PRs, foreigners, institutional investors, etc.) bought a massive volume of U.S. homes at higher and higher prices and financed them by debts, a big portion of excessive amounts and on loose terms (e.g. interest-only contracts, high loan-to-value ratio, etc.), over a sustained period of time of over 5 years. And this underlying problem was actually the root-cause of the 2008/9 U.S. financial crisis, which was triggered by the failure of some badly structured mortgage-backed securities and derivatives, and bank failures. And now - 4 years later - even Barack Obama (U.S. Government) and Ben Bernanke (U.S. Fed) couldn't stop U.S. home prices from going down further; nobody can! We just have to leave the market correction to run its full course.

In Singapore, we already have the same root-cause building up for quite a few years now, which has been further fanned by our government's CPF housing policy and the untold policy of using/allowing rising home prices to create wealth for everybody, very low SGD borrowing interest rates, and stretched home mortgage repayments offered by banks. When the bubble finally bursts, there is no reason why we would not suffer the same effects - a massive correction of home prices, to be followed by a long period of falling and depressed home prices, likley accentuated by rampent foreclosures. You and I can't do anything to stop it; and I doubt even our government can.
So what do you do in the mean time i e lots of cash for property / stocks but no crash? Wait patiently, or invest? For me, my cash in waiting remains, but new cash (salary, bonuses) starts to flow into some dividend stocks.

Somehow I have the feeling that stocks have gone up because money has become 'smaller', that's why DJII could move from 100 ( years ago ) to 13,000.

dydx is saying that the next subprime will be in Singapore?
Interesting to compare the residential property price charts for the U.S. and Sgp - see below:

[Image: housing-2010-03-26-sfd-housing-prices-in....jpg?w=640]

[Image: Graph-1.jpg]

1986-96
US: sideways
SG: up about 3X (cpf relaxation, fast econ growth, ??)

1997-2006
US: up about 0.5X (subprime bubble)
SG: down about 0.4X then sideways (AFC, dotcom bust [didn't affect US!], SARS, ??)

2007-now
US: down about 0.4X (subprime bust)
SG: up about 0.6X with brief dip due to subprime (strong household balance sheets, population growth due to immigration, foreign demand, ??)

Seems to be an inverse relationship (not necessarily correlated) over past 25years. In spite of SG interest rates being influenced by US rates. Other factors seem to be at work.....
yes, 8000 BTO flats with some already completed for move-in...

This is what Khaw has been planning for.... Big Grin
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