Prices and sales still holding up

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#1
So much for the "cooling" measures!

The Straits Times
www.straitstimes.com
Published on Nov 10, 2012
NON-LANDED PRIVATE HOMES
Prices and sales still holding up

Property market remains hot despite cooling measures last month

By Esther Teo Property reporter

HOME buyers seem to have shrugged off the latest round of market-cooling measures.

Both prices and volumes of non-landed private homes that changed hands last month held firm. Most sales came after the measures were unveiled on Oct 5.

Resale prices flatlined at $1,209 per sq ft (psf) last month, unchanged from September's prices, according to data from the Singapore Real Estate Exchange (SRX).

Strong sales volumes were posted, with 1,328 homes changing hands last month, more than the monthly average of 1,190 units in the April to September period.

The figures cover only resale non-landed transactions.

New projects such as eCO in Bedok and Sky Green off Upper Paya Lebar Road also continued to post healthy sales, with hundreds of units snapped up.

The SRX collates transactions, accounting for more than 80 per cent of the private market, by major property agencies.

This robust showing comes despite the sixth round of cooling measures announced last month designed to stop home buyers from over-extending themselves.

For instance, home loans are now capped at a tenure of 35 years.

Buyers taking a loan of more than 30 years, or extending past the retirement age of 65, will have to fork out more in cash.

City-fringe homes posted the strongest showing, with average resale prices last month rising 4.5 per cent compared with the July to September period. Suburban homes posted gains of 4.2 per cent while city-centre home prices rose 1.8 per cent, the SRX said.

Experts say that ample liquidity in the market, low interest rates and the fact that the previous five rounds of measures have failed to bring prices down have kept buying sentiment positive.

Savills Singapore research head Alan Cheong noted that "market fatigue" towards the measures has set in and buyers might be throwing caution to the wind despite the measures and threats of new policy risks.

"The recent measures seemed more geared towards safeguarding the banking system from excessive lending... But older people, who are the investors, still have a lot of reserves and are able to pay cash upfront," he added.

ERA Realty key executive officer Eugene Lim said the resilience could indicate that most do not go for long-mortgage loans.

He expects prices to continue inching up as land and construction costs remain elevated. The Housing Board resale market, which has seen prices continue to climb, also provides a support for suburban home prices.

"For demand and hence prices to be affected, it must mean an economic downturn, external shocks or if interest rates rise and the holding power of owners is lessened," Mr Lim added.

HSR Property Group special adviser Donald Han noted that there has been "a sense of optimism" in the market with no negative news in recent weeks.

Buyers who are affected by the new measures are not leaving the market entirely but could be buying smaller, more affordable units instead, he added.

But the rental market saw slimmer gains, with average unit rents rising just 0.5 per cent to $3.89 psf a month.

This weaker rental showing relative to strong price gains led to overall gross rental yields falling to 3.87 per cent last month from 4.01 per cent in the third quarter.

Savills' Mr Cheong said that the lower yields are unlikely to indicate that prices might soon fall in tandem. This is because low interest rates means that there is still "a good spread between borrowing costs and interest rates".

SRX data also pointed to the narrowing price gap between city-centre and suburban homes.

The price premium for resale city-centre homes has fallen to 85 per cent, the lowest since 2007. This is even lower than the trough of 92 per cent at the height of the global financial crisis in the first quarter of 2009.

esthert@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
(10-11-2012, 07:36 AM)Musicwhiz Wrote: So much for the "cooling" measures!

The "cooling" measures is not aimed at depressing property prices. It is specifically targeted to avoid property bubble.

The price continue to increase does not necessary mean the "cooling" measures are not working. The property bubble introduced by speculation and investment are being suppressed significantly by the measures
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#3
IMHO I think we're already in a ppty bubble... Too late to avoid already. The cooling measures I believe are to lessen instances of pple overextending themselves, so that when the bubble pops, the extent of damage is smaller than if there were no measures.
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#4
(10-11-2012, 03:39 PM)Muck Wrote: IMHO I think we're already in a ppty bubble... Too late to avoid already. The cooling measures I believe are to lessen instances of pple overextending themselves, so that when the bubble pops, the extent of damage is smaller than if there were no measures.

http://www.singstat.gov.sg/pubn/papers/e...ip-e41.pdf
Pg 26

Is it a bubble or Singaporeans are simply too rich?

Total Liabilities(Mortgage loans + Personal Loans) = $315 billion
Total Financial assets (not inclusive of property assets) = $784 billions
Total Financial assets - CPF = $565 billions.

Is there a bubble??

If this is the balance sheet of a company, I think it is a very healthy balance sheet.
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#5
(10-11-2012, 03:53 PM)yeokiwi Wrote: Is it a bubble or Singaporeans are simply too rich?

Total Liabilities(Mortgage loans + Personal Loans) = $315 billion
Total Financial assets (not inclusive of property assets) = $784 billions
Total Financial assets - CPF = $565 billions.

Is there a bubble??

If this is the balance sheet of a company, I think it is a very healthy balance sheet.

In 1996,
Total Liabilities(Mortgage loans + Personal Loans) = $89 billion
Total Financial assets (not inclusive of property assets) = $251 billion
Total Financial assets - CPF (73billion) = 178 billion

This in fact has an 'even better current ratio' than current situation. But we do know what happened next...I am NOT saying we are already in a bubble (i have given up trying to take a stand on that), but been an open economy, SG is susceptible to all the dynamics of the global situation. Nonetheless, traditionally SG has a healthy balance sheet and that does help in times of crisis.
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#6
(10-11-2012, 03:53 PM)yeokiwi Wrote:
(10-11-2012, 03:39 PM)Muck Wrote: IMHO I think we're already in a ppty bubble... Too late to avoid already. The cooling measures I believe are to lessen instances of pple overextending themselves, so that when the bubble pops, the extent of damage is smaller than if there were no measures.

http://www.singstat.gov.sg/pubn/papers/e...ip-e41.pdf
Pg 26

Is it a bubble or Singaporeans are simply too rich?

Total Liabilities(Mortgage loans + Personal Loans) = $315 billion
Total Financial assets (not inclusive of property assets) = $784 billions
Total Financial assets - CPF = $565 billions.

Is there a bubble??

If this is the balance sheet of a company, I think it is a very healthy balance sheet.

I think these stats may be skewed, because some people may have tons of assets (e.g. the super rich) while others may have a weaker balance sheet (i.e. more loans than assets). So it really depends - I think certain segments of the population may be more vulnerable than others.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#7
The answer is probably in between. The property prices are crazy but it is difficult to believe that the property sector is in a state of bubble based on the statistics.

If the employment rate remains high, it is kind of hard for the property market to crash.
Even the property developers are also flushed with cash.

Many are looking for cheap sale but I am not sure whether it will come in the next few years.
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#8
(10-11-2012, 09:35 PM)weijian Wrote:
(10-11-2012, 03:53 PM)yeokiwi Wrote: Is it a bubble or Singaporeans are simply too rich?

Total Liabilities(Mortgage loans + Personal Loans) = $315 billion
Total Financial assets (not inclusive of property assets) = $784 billions
Total Financial assets - CPF = $565 billions.

Is there a bubble??

If this is the balance sheet of a company, I think it is a very healthy balance sheet.

In 1996,
Total Liabilities(Mortgage loans + Personal Loans) = $89 billion
Total Financial assets (not inclusive of property assets) = $251 billion
Total Financial assets - CPF (73billion) = 178 billion

This in fact has an 'even better current ratio' than current situation. But we do know what happened next...I am NOT saying we are already in a bubble (i have given up trying to take a stand on that), but been an open economy, SG is susceptible to all the dynamics of the global situation. Nonetheless, traditionally SG has a healthy balance sheet and that does help in times of crisis.

To be more precise, if looking at just cash + cpf (instead of total financial assets minus property) vs household debt (total liabilities) over the years, this ratio is actually improving over the years since 1996. See chart from my post 7 months ago http://www.valuebuddies.com/thread-1954-...l#pid23358
As was pointed out, this is only a macro view as the national balance sheet is not evenly distributed across the population.

[Image: sghouseholdsbalancesheet1997-2011.jpg]
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#9
for residential property to live by owners, there is not any major problem. I did not go through 1997, but I believe the property to live was not affected. Banks probably did not foreclose many such properties. The problem lies with investment property with mortgage, imo.

Business nowadays is inter-linked. Subprime basically is a mortgage issue, but investment banks and insurers suffered a lot. A lot of business depends on high property price. When it comes down quickly, it does not matter that much how strong a balance sheet you have. During crisis, companies with good or bad balance sheet was affected.
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#10
(10-11-2012, 11:17 PM)swakoo Wrote: To be more precise, if looking at just cash + cpf (instead of total financial assets minus property) vs household debt (total liabilities) over the years, this ratio is actually improving over the years since 1996. See chart from my post 7 months ago http://www.valuebuddies.com/thread-1954-...l#pid23358
As was pointed out, this is only a macro view as the national balance sheet is not evenly distributed across the population.

[Image: sghouseholdsbalancesheet1997-2011.jpg]

Just a quick question. The household debt level seems to show a rise of 2X, from 100mil 1997 to 200 mil current.

Is this possible? A HDB bought in 1997 should be even lesser than 50% of what is 2011Q3 price as seen from HDB property index level.
I am not even touching private properties yet.

Household debt is only twice as much as from 1997 but properties price has risen more than twice from 1997.
Am I missing out something?

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