Dark clouds over Singapore’s housing market — Colin Tan
JUNE 30 — The deterioration of the euro zone debt crisis during the past few weeks has once again cast dark clouds over the private housing market in Singapore.
Feedback from various market players — housing agents, bankers and valuers — indicate a significant slowdown in home purchases in both the primary and secondary markets during this period.
This has happened so regularly that, by now, you cannot help but notice the strong links between buying sentiment here and the problems faced by the European Union (EU). The greater the gravity of the problems in Europe, the weaker the market sentiment here in Singapore.
In a way, this reaffirms the view that most of the home-buying today consists of investment buys rather than for owner occupation.
Genuine buyers purchase based on long-term needs after taking into consideration their levels of affordability. Long-term needs do not change overnight, which means the buying should continue. Investors, on the other hand, time their purchases and these are based mainly on market sentiment.
The stillness of the housing market has led to talk among some market players of impending doom and gloom and of cheap property sales next year or earlier.
However, for most investors, this is just the same old talk they have heard many times before. What they find thoroughly confusing is the seemingly never-ending saga of whether Greece will exit the euro zone: How should they factor this into their property-buying decisions? One day, it is “buy” and another day it is “don’t buy”.
By now, most investors would have read the learned views of many prominent economists who say it is no longer a question of whether Greece will exit from the euro zone but when and how.
Personally, I believe that if the EU does not have control over the budgets of individual member countries, it will only be a matter of time before Greece exits the euro zone, which will possibly lead to the disintegration of the entire bloc.
At the same time, I believe there is strong political will to keep the euro zone going.
United States billionaire George Soros, in a recent opinion piece in London’s Financial Times, said Germany must change its “can’t do” policy. He was referring to German Chancellor Angela Merkel’s resistance to all proposals to provide relief to Spain and Italy from the excessive risk premiums prevailing in the market.
I believe it is not that the Chancellor does not understand the gravity of the situation in these countries and in Greece. It is probably “wayang (theatre)”, as we say in Singapore, to get the best deal for her country because — as the richest nation in the EU — it will end up footing most of the bill to keep the euro zone going.
At the same time, politicians in Greece will continue to threaten to leave the euro zone in order to get more pro-growth programmes and reduce austerity measures for their beleaguered country.
The “wayang” will keep the action close to the edge of the cliff but, time and again, the key players will pull back at the last minute. The danger is that one party may play it too far by mistake and plunge the global economy into catastrophe. But I believe every “wayang” player recognises the cost of playing it too far. Nobody wins.
It is the same with players in the financial markets. They earn more commission when there is volatility in the markets, which gives rise to trading opportunities. Flat inactive markets earn no one any commission.
So do not be surprised to find that when Greece’s problems are finally solved, they will pick on the weaknesses of another country. The problem of excessive overspending by any country does not happen overnight; it is an accumulation from years of ill discipline.
I believe the rating agencies can make a case for downgrading the ratings of several EU countries at the same time. But that would be like killing the goose that lays the golden egg, wouldn’t it? — Today
* Colin Tan is Head of Research and Consultancy at Chesterton Suntec International.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.