Side Views

To cool or not to cool? — Colin Tan

MARCH 23 — The new private home sales data for last month in Singapore released last week caught many in the market by surprise, partly because the buying was more broad-based and spread across more projects, many of which did not feature in the news. It sort of crept up upon us.

A record 3,138 new homes — including 725 executive condominiums (ECs) — were sold last month. If we take out the ECs, the 2,413 private homes sold were second only to the 2,772 units purchased back in July 2009, when private home prices were rebounding strongly from their lows brought about by Singapore’s worst economic recession.

The latest numbers brought total private home sales for the first two months of the year to 4,285 units — a scorching pace to start the year because it would mean sales will surpass an unimaginable 25,000 units if it continues at this rate. Sales have been in the region of 16,000 units per annum for the past three years.

Inevitably, many have been quick to raise the strong possibility of even more cooling measures being introduced if the robust buying does not abate.

When home sales rebounded in January, some analysts pointed out that the bulk of sales were confined to a few well-conceived projects and questioned whether the outstanding performance could be sustained.

Well, last month’s numbers not only confirmed that but showed that it could be surpassed as well.

And why not? There has always been a strong correlation between launches and sales. The statistics show developers launched almost 3,600 units last month, 35 per cent more than in January. And we know from the quarterly property reports that more are on the way.

If the project launches continue at this pace, I am almost certain last month’s sales can be matched in the coming months. This brings us to the question: Should strong sales in themselves be a concern if not accompanied by large price increases?

After all, the government has pledged and has continued to sell as much land as long as there is demand. Would it then be fair to developers to curb the demand side before reducing land supply?

The main focus of December’s cooling measures has been on investors, particularly the foreign ones. Recent numbers suggest that the proportion of non-resident purchases has dropped to between 6 and 7 per cent in the first two months of this year from 17 per cent last year.

At the moment there are no figures measuring the impact on local investors. I am sure they have been similarly affected. Many have already turned their attention to non-residential properties.

That would be the natural reaction of most investors — to hold back and observe for the time being. But I am certain they will be back once the market sorts out how it will fine-tune its marketing efforts to attract those affected by the additional buyer’s stamp duties.

For developers, they seem to have their hands full just dealing with local buyers, so there is no urgency on their part.

For individual sellers, they have to realise that they need to compromise or at least be perceived to have compromised when dealing with the additional taxes facing investors.

I am sure some of the bigger deals concluded recently involved some sort of compromise, or else these buyers would look really silly.

In the meantime, what has happened is that a new wave of investors who have been hitherto watching and waiting on the sidelines have suddenly seen their opportunity. Previously, many would not even have gotten a whiff of a VIP invite to a project launch. Today, they are inundated by such invites whether by mail or SMS texts.

If you ask around — and I do that every time I meet people — you will realise that there are many layers of “interested” potential buyers. The question is: how many layers are there and how deep is each layer?

Some have been waiting for one to two years now and are getting impatient. And when they cannot take the wait any longer, they jump in.

Till today, many continue to be surprised by the depth of liquidity in the market. Do we consider such purchases to be a problem? Do these novice investors need protection from themselves?

The rule for any investor is always to buy low and sell high. Over the past few months, many have commented that the market has peaked.

Are they right or can we envisage a much higher price level than the present? More importantly, will the authorities tolerate it?

The answers to whether novice investors need protection from themselves may determine the tone and character of the next set of cooling measures, if any. — Today

* Colin Tan is Head, Research and Consultancy, at Chesterton Suntec International.

* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

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