New steps rain on speculators' parade

[arthur]

MW-san

I am definitely not a property investor with Koh-san's capabilities, but a classical bubble has the euphoria state of sentiments that in spite of external intervention, keeps on rising on momentum.

We have several sets of goverment intervention measures previously over the span of several months. Yet the momentum doesn't cease much.

Is this the result of external foreign hot money coming into our shores or are these monies really genuine long term investments or buying a roof over the heads?

If we were to look at the below data set, we see a chart where the momentum seems to be tapering off.
http://www.ires.nus.edu.sg/srpi.aspx

Is this the result of successful government intervention or otherwise?
I do know the govt is trying to lock down foreign investors' monies thru properties purchases but capital being by itself, seeks to highest returns, will move on to other places.

We had the best GDP growth in history recently. Mean reversion concept shld tell us its time to come back to earth.

I have some doubts on the ability of developing countries being capable of managing their inflation rate, thanks to Feds' infinity $$ printing.
Why would foreign investors place their monies with us when other countries are increasing their interest rate at current moment? Bcos we respect land rights and political stability? Both factors doesn't count much when the equities bubble burst again.

I am focusing on the external factors which may affect us drastically. I do not think the properties' momentum will reverse due to internal factors.

Are we looking at 1997 all over again?

I noted some forumers saying Singapore has a unique system where the govt control the demand and supply. The only problem is the government is made up of people.
And we all know humans do make mistakes in their calculations and assumptions.

The Euro adoption was supposed to eliminate all EU members discrepancies in financial strength and have a one common currency. The presumption was that EU countries' bonds should have the same gaurantees. Greek bonds should be as strong as Germans.
Turned out not to be.

Cheers

[Musicwhiz]

Hi thanks Arthur for your detailed and lengthy explanation. I see where you are coming from, and yes I do share the same sentiments that things on the ground are getting bubbly.

Problem as you said is that everyone believes the Govt will prop prices up and that Singapore is "ünique". This has become so entrenched in our culture that most will not think twice about buying an investment property as they now believe that "prices can only go up" over time (even if you hold for 10 years!). I guess the lessons from the last great crash in 1997 are all but forgotten because it was an event which occurred 14 years ago.

As to whether we will witness another crash in the residential market, I am not sure as I am not an expert either. But there may be more than one factor which will eventually turn the tide, rather than just Govt intervention.

[Jacmar]

As to whether we will witness another crash in the residential market, I am not sure as I am not an expert either. But there may be more than one factor which will eventually turn the tide, rather than just Govt intervention.

I have been through 2 property cycle boom/bust. the govt regulations will not cause the bust. It will at best prevent it from shooting up and correct it 5-10%. from the last 2 bust(85/86 and 96/97), it was the recession and the financial crisis that brought down the mkt. whether this time round will cause a crash will depend on external factors again: interest rate and liquidity. on the economic front I think we won't see a recession. my gut feel says a deeper(10-20%) correction in 2013 when the new supplies comes on line and interest rate starts to go up.

[namaste]

I am of the same view that these Government intervention measures will arrest the speculative demands and will not cause a crash.

This is because the supply side is still supported by ultra low interest rates - current private property interest rates hovering around 1%. So people who are holding existing properties will rent it out (there are enough foreigners around. The landlords may have to be less choosy regarding their tenants). With this ultra-low interest rates, the monthly rentals are able to cover their mortgages (typically stretched to the max # of years permitted).

Another big factor on the supply side is that with the ultra-low interest rate and revenue from 2010's big sale, developers too can afford to hold back launches. Thereby constricting supply further in the short term (prob. 1H 2011)

I agreed with Jacmar that the really test will be the new supply coming on stream (purchases in 2009 2H/ 2010) in 2013 (I am quoting Q3 URA supply side data as ". . . . 4th Quarter 2010 Real Estate Statistics to be released on 28 January 2011."

http://www.ura.gov.sg/pr/text/2010/pr10-123.html - see "Supply in the Pipeline"

Data on supply by year - http://www.ura.gov.sg/pr/graphics/2010/pr10-123e2.pdf

The expected year of completion of private residential properties
2011 : 6,766
2012 : 9,149
2013 : 18,712 --> this is a big over-hang.
2014 : 15,012

I also noticed that most developers are able to pull forward their TOP by 6 - 12 months depending on the size of the project. Therefore, excess supply may start in 2H 2012.

In addition, for some external reason in the Global Economy in 2012/2013 the interest rates creeps up, it will be a double wammy.

[freedom]

certain developers have the power to hold the property price for a while, the problem is that other developer might use that opportunity to offload all their unsold units. Unless the price is collectively held up, otherwise there will be developers taking advantage of other developers.


who wanna be the developers to hold the property price for others to benefit?

[mikh]

Hong Kong recently implemented penalties on developers who take too long to develop the land. In Sg, if there are no penalties for sitting on acquired land banks, developers may continue to sit on things longer, especially if the cost of capital for that land is not too demanding, varying if construction costs are factored in.

[newborn1000]

The liquidity flow from property investment to equity investment will be interesting..........Most people are irrational, they wont understand valuations......

This kind of reminded me of 2007........when the deferred payment scheme is withdrawn..........http://www.salary.sg/2007/property-deferred-payment-scheme-withdrawn/

Not implying that the bull rally is dead, just saying the game will be more interesting...........lolx

[koh_52]

Aiyo, Arthur san dun make my head smell leh….i am still behind serial entrepreneur san..no sound no pic from this guru..hope 1 day he will hop in.
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I expected first 2 mths is a waiting game between seller n buyer (look see look see), then come 3rd mth those weaker player will bite the first bullet and subsequently prices will fall by at least 10% this year.

This round definitely phased out the shadow pocket players or speculators, imagine a 1 million property, 40% down payment & stamp duty come close to ½ million cash, hmms not an easy task for those layman.

Congra, to those deep pocket folks who r looking for long term investment, this group now smiling quietly at one side……no 10% discount no buy, hehe.

Well hard to say, after 6 mths maybe could be also after erection too and anything might happen……1 thing our garment unlike other country will not over-night change their laws However, they might inject defer payment scheme or extend loan period, maybe up to 75 yrs old. Any booster they can think of….if the property market dive.

My take, within 9 mths the market will balance back to its equilibrium and volume start to pick up again……..thereafter the next killer will be interest rate hike and this could be the last cooling measure…dun miss the opportunity to buy a boat and 10 yrs later its grow to a ship…hehe.

[sgd]

I heard a story recently about a seller bought his condo for ard 900k and wanted to sell for 2mil. He was offered 1.9m, a cool 1m profit but refused to sell. This market is becoming ridiculous like the tulip mania driven by cheap money and now greed. This is definately a bubble.

[yeokiwi]

The liquidity flow from property investment to equity investment will be interesting..........Most people are irrational, they wont understand valuations......

This kind of reminded me of 2007........when the deferred payment scheme is withdrawn..........http://www.salary.sg/2007/property-deferred-payment-scheme-withdrawn/

Not implying that the bull rally is dead, just saying the game will be more interesting...........lolx

That's an interesting perspective.
The end FY results in Feb for most companies will be quite good due to the low base in 2009. The funds and retail investors may direct their excess cash on the stock market in the short term since property flippings are out in the short term.

Or the stock market will go low together with the property market?
Either way, I am ok