TODAY ONLINE : Watch what they do, not what they say

Watch what they do, not what they say

Jurong West EC site and Bedok mixed-use tenders presage bumpier ride ahead

05:55 AM Aug 20, 2010

by Chesterton



The Real Estate Developers' Association of Singapore (Redas) elicited much controversy when it launched its Real Estate Sentiment Index (Resi) for Q2 2010.

Sceptics questioned the credibility of developers as they would have a natural vested bias towards generating positive sentiment, which would help them sell their properties.

There is a lot of noise generated in the market these days and, if you are inexperienced, you would not be able to separate the truth from the noise. It pays to approach every news item with a good dose of cynicism until convinced otherwise.

Even "impartial" property analysts are known to scramble to put their views across to the media at every opportunity to shape opinion. Reporters have it so much easier today. In the past, they had to trouble experts for their views. Today, they have more unsolicited opinion than they can use.

As a result, we often get too much micro-analysis of the data but very little of the big picture that matters. This can be confusing for readers because the views are not always consistent.

The reader needs to be a lot more discerning today. It is important to know where the comments are coming from. A marketing person will give you marketing talk, while a public relations person will give you PR talk.

Personally, I welcome the launch of Resi as it shows that Redas is adapting to today's fast-changing market. In the current globalised environment, property cycles can peak and trough in a matter of a few years. Every channel that relays feedback quickly is welcomed.

Over time, the market will learn to embrace Resi and its findings. The discerning reader will evaluate its reliability according to its source.

People often complain to me about developers and their media comments. But to me, they are the true experts of the property market. After all, they are putting their money where their mouths are.

The trick is not to put too much weight on what they say but to focus on what they do or do not do.

Last Wednesday, developers said a lot when they did not submit even a single bid for the tender of the Executive Condominium (EC) site at Jurong West.

Experts say the site is remote and not next to an MRT station. As far as I can recall, there has never been any EC site next to a station. These sites are usually reserved for private housing as they generate more revenue.

It is not much more remote than other EC sites. Even if it was perceived to be remote, are we not in the midst of a strong property bull run?

One developer was quoted as saying that because ECs catered to a closed market, its location was especially important. I would think location is important for all properties, not just ECs.

Even if the site is not that good, developers can always submit lower bids. After all, they are supposed to be still hungry for sites.

Contrast this result with the high bids and good participation in an industrial land tender, which closed only the day before.

For sure, closing the tender within the Hungry Ghost Month was just tempting fate a little too far. As a group, developers are a lot more superstitious than buyers.

It did not help that the stock market was having a bad run. The benchmark Straits Times Index had been declining each trading day since a week before. The market was stumbling right up to the date and time of close of tender.

The turmoil was probably enough to spook developers, which leads me to question whether the housing market is on edge and not as robust as we thought. Previous tenders have rode out such similar crises.

I was hoping that a tender closing on Tuesday for a mixed-use site with some residential component next to the Bedok bus interchange and MRT station might help clarify some doubts but the tender closing was delayed. I understand it was to give developers more time to assess the site.

Probably, but is there more to it? I leave it to the reader to decide. Whatever the actual reason, the ride for the housing market is going to be a little bit more bumpy from now on.



The writer is Head of Research and Consultancy at Chesterton Suntec International.

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