Source : The Business Times, July 31, 2009

Mah Bow Tan's caution aimed at averting pain later, property market watchers say

Better to suck out the froth now than to burst the bubble later - that was what market watchers saw as the government's intention in warning against rash property purchases.

National Development Minister Mah Bow Tan said on Wednesday that there are signs of speculation in the property market, and the government will act if it overheats. He also urged home seekers to buy only within their means.

On the surface, the message may seem puzzling. By most accounts, speculators from the boom years - those who 'flipped' their freshly bought units in the subsale market for a quick profit - have yet to make a huge comeback. Price increases have surfaced only at some projects, while several others still registered price falls.

At CapitaLand's results briefing yesterday, group president and CEO Liew Mun Leong also observed that home demand is 'healthy', supported partly by home seekers whose estates were sold en bloc.

But dig deeper and the cause for concern becomes more apparent. Some industry watchers acknowledge that a group of 'specuvestors' is emerging. These are buyers who are prepared to keep and lease out their properties over the longer term, but are also open to selling them for capital gains if the opportunity comes along.

Although Singapore's economy is shrinking, several factors are working in specuvestors' favour. Notably, interest rates on bank loans are low, and more small apartments going for less than $1 million have become available. Many of them are also lucky enough to still have jobs, and some could have made a killing from the recent stockmarket rally.

These investors, together with genuine homebuyers, have raised market activity to a level that authorities feel is out-of-sync with weak economic fundamentals. The fear? That some would not be able to repay their loans if they lost their jobs, or if banks raised mortgage rates in the future.

'I have seen sufficient cases in my Meet-the-People sessions, where people have over-committed and now find themselves in difficulty,' Mr Mah recounted on Wednesday.

CIMB economist Song Seng Wun said in a note on Wednesday that Singapore's Q2 09 jobless rate is expected to cross 5 per cent. The unemployment rate for Singaporeans and permanent residents rose to 4.8 per cent in Q1.

Falling rentals would also test buyers' ability to support home loans, said Chesterton Suntec International's research and consultancy director Colin Tan.

So to several industry watchers, the government is sounding a note of caution, just in case. As a developer told BT: 'What if the green shoots turn brown?' The formation of a bubble - particularly on shaky ground - would require overt intervention and the consequences are unlikely to be pretty.

Take a look back at 1996, when the government introduced a surprise anti-speculation package to curb sharp spikes in private home prices. Tighter credit, a tax on gains and higher stamp duty caused sentiment to sink and transaction volumes to plunge. This is history that most would not want to see repeat itself.

The key is whether the government's words will help calm the buying frenzy at this stage. Here, views are mixed.

Some people may cool off, said Wheelock Properties (Singapore) CEO David Lawrence. 'I think (Mr Mah is) more focusing on the greedy people who overgeared, took on too many liabilities, and he's just saying 'be careful' . . . I think that's a reasonable message to the market.'

But some also think the buying will continue as long as money from savings, banks or stockmarket winnings is around. A developer also suggested that a few people might bring forward their purchases in anticipation of anti-speculation measures coming on. 'Singaporeans are a bit 'gan cheong' (panicky),' he joked.

At Optima, where people started queuing days before the showflat was due to open, developer TID has conducted a ballot for the 120 units planned for release. All units have been tentatively accounted for with prices starting from $790 per square foot. TID is a tie-up between Hong Leong Group and Mitsui Fudosan. A Hong Leong spokesman said that the balloting process helps to sieve out genuine buyers and the crowds have thinned. BT understands that there were already plans to conduct a ballot when a queue first formed, before Mr Mah spoke to the press on Wednesday.

Market sources also say that around 80 units have been sold at Centro Residences, out of around 110 released.

Source : The Straits Times, July 30, 2009

THE recent exuberance in Singapore's property market could see prices creeping up some five to 10 per cent by end of this year and into the next, said CapitaLand's chief executive Liew Mun Leong on Thursday.

CapitaLand's chief executive Liew Mun Leong said the firm is waiting 'to pull the trigger at the right time' with regards to project launches and will be launching its Gillman Heights (left) site for sale soon. --PHOTO: CAPITALAND

At the moment, the demand from homes is in a 'healthy state' and it does not appear there is bubble forming yet, said Mr Liew.

'If people are buying homes only as investment tools, then it's a different story,' he said at the firm's results briefing.

The firm is Singapore's biggest property group by market capitalisation.

National Development Minister Mah Bow Tan on Wednesday said speculation is creeping back into the property market, even though it is not execessive at the moment, adding that the government is watching the situation closely and will take 'whatever action necessary' to make sure it does not overheat.

Mr Liew said the firm is waiting 'to pull the trigger at the right time' with regards to project launches and will be launching its Gillman Heights site for sale soon.

The developer paid $548 million for the condominium but a lengthy legal tussle spanning more than two years had delayed the redevelopment of the estate.

Meanwhile, the firm has seen strong buyer interest at its project, The Wharf Residence, in which 94 per cent of its 173 apartments has been sold, said Mr Liew.

Despite improved sentiment however, the global economic crisis continued to weigh on the firm's financial performance due to weaker market valuations.

CapitaLand posted a second quarter loss of $156.9 million, down from net profit of $515.2 million in the same quarter last year.

This is due to revaluations and impairment provisions primarily related to the Singapore office portfolio, real estate assets in Australia and the former Char Yong Gardens site in Singapore, said the firm.

Revenue also declined 27.9 per cent to $591 million in the second quarter.

For the first half of the year, revenue dropped 25.7 per cent to $1.08 billion compared to same period last year, while profit was a negative $114.1 million compared to $762.7 million in the same period last year.