TODAY Online : Singing the bubble blues

Singing the bubble blues

Is the market really cooling off? Some don't think so and expect more measures if exuberance persists

05:55 AM Nov 21, 2009

by Tan Hui Leng

SINGAPORE - Sales of private homes have dipped to their second lowest level this year in October according to data released by the Urban Redevelopment Authority (URA) this week.

While market observers believe that this downward trend was the result of the recent anti-speculative measures introduced by the Government, some analysts are sceptical that the market has started to cool.

According to statistics, sales of new properties have been tapering off in the last three months from 1,805 in August, to 1,143 in September, and 811 in October.

Still, this is after a record of 2,772 units sold in July and way above the year's lowest level in January when only 108 units were sold.

Analysts reckoned that sentiment in the property market had simmered down in August and September as it coincided with the Hungry Ghost Festival, a traditionally quiet period.

Sales failed to pick up in September after the Government announced anti-speculative measures which included the removal of the Interest Absorption Scheme.

However, Chesterton Suntec International's research and consultancy head Colin Tan said that the total of 811 units sold in October was still above average when compared to some 600 homes sold a month before 2007 - the height of the last property rally. This figure, he added, does not bode well when factors such as falling rents and supply glut are taken into account as well.

According to URA's data, the vacancy rate of completed private residential units increased from 5.9 per cent as at the end of Q2 this year to 6.2 per cent as at end Q3.

"Government intervention is inevitable," said Mr Tan, who attributes the strong showing in property sales to excess liquidity from both local and foreign buyers.

"This excess money is too strong to fight," said Mr Tan. He also expects the authorities to consider reducing mortgage loan amount to a lower proportion of the sale price - down from the 80 per cent now.

"If confidence is hit badly, then at least the asset bubble will not be as large," he added.

Meanwhile, Ngee Ann Polytechnic real estate lecturer Nicholas Mak takes a more sanguine view. "I don't think the authorities will put in any measures in the next three to six months," he said. "I expect sales to move forward on a steady keel and keep within the volume of 600 to 1,500 units."

As long as there are no excessive signs of speculation and no sharp price increases, Mr Mak does not expect the authorities to take further action, particularly as the decline in rental is moderating and hitting bottom soon.

"Possible danger signs are when everything starts to go up: Prices, rentals and volume of speculation," he said. "Then that is when the Government may do something."

Jones Lang Lasalle South-east Asia's head of research, Dr Chua Yang Liang, expects transaction volume in the non-landed segment to contract by a further 10 to 20 per cent on the back of the seasonal year-end slowdown and anti-speculative measures.

"However, should housing price growth continue to surge ahead of economic fundamentals despite the recent moral persuasion by the Government to cool residential demand, further anti-speculative measures with a bigger bite could be introduced. For example, a capital gains tax say for those who flip within a two-year period of the first purchase," he said in response to the monthly sales figures released on Monday. Tan Hui Leng