Speculation creeping back into market: Mah

Source : Business Times – 30 Jul 2009

Govt will act if housing market overheats; supply pipeline is strong

Speculation is trickling back into the property market and the government is watching the situation closely, National Development Minister Mah Bow Tan said yesterday.

The authorities will take action should the market overheat but home seekers should also be careful about making purchases, he underlined.

‘I wouldn’t say that there is excessive speculation at the moment but there is some element of speculation involved,’ Mr Mah told the press after the topping-out ceremony for Tower One at Marina Bay Financial Centre (MBFC).

‘Some of the practices and habits that you saw in the last property boom are beginning to come back.’

Queues have started forming outside some showflats and property agents are reportedly armed with blank cheques from clients.

Median prices have also gone up at some launches – by up to 7 per cent a month in a handful of cases. This has stemmed the fall in private home prices, with the Urban Redevelopment Authority’s (URA) price index sliding 4.7 per cent in Q2 from a quarter ago – much less than the 14.1 per cent tumble it took in Q1.

The question, though, is why a buying wave is forming when economic waters remain tepid. The slowdown has moderated but a contraction is still on Singapore’s books, Mr Mah said.

The official forecast now points to the economy shrinking 4-6 per cent this year.

It is therefore unclear if the buying momentum is sustainable, he said. ‘I’m not so sure whether the demand is due to pent-up demand, or whether it is due to buyers responding to lower prices by developers or even to the current low interest rates.’

While it is premature to call it the start of a property bubble, the government is monitoring the market closely and will take ‘whatever action is necessary’, Mr Mah said.

He also urged home seekers to research the property market thoroughly and seek affordable units.

‘Don’t panic – because there is a lot of supply in the market.’

According to URA, there were 62,350 uncompleted private homes from projects in the pipeline at the end of Q2. Of these, 38,482 units were still unsold.

The government can also inject supply through the Government Land Sales (GLS) programme, Mr Mah said. It is considering whether it should reintroduce the confirmed list (suspended last October) for the first half of 2010.

Responding to Mr Mah’s comments, the Real Estate Developers Association of Singapore (Redas) said that developers share a ‘common desire to see a steady growth, for greater stability and sustainability in the property market’.

It also highlighted that not all property launches have been snapped up.

‘Only a selected few launches have been highly successful for various reasons. This could also be a result of pent-up demand.’

Industry watchers saw Mr Mah’s message as a signal against excess exuberance in the market. The move could have contributed to a fall among major property counters yesterday: City Developments lost 10 cents to close at $9.94, while CapitaLand shed six cents to $4.00.

Colliers International’s research and advisory director Tay Huey Ying felt that there is ‘genuine concern’ about the sustainability of current demand. Some buying has been driven by accumulated wealth from the boom years and when the funds dry up, it will take strong economic fundamentals to generate new demand, she said.

But she also believes that the government will ‘tread cautiously’ when it comes to tempering market sentiment, because the pick-up has only begun and is fragile.

Developer sales of private homes started to recover in February – interest first poured into mass-market projects and gradually filtered into mid- and high-end ones.

Over the last month, for example, KOP Group sold 11 units at its luxury site The Hamilton Scotts, at prices ranging from $2,500 to $3,000 psf.

Across liquidity-flush Asia, several economists have flagged the risk of property bubbles forming. However, many do not believe that policymakers will aggressively tighten measures when economic recovery remains nascent.