Kwek: Govt can play downpayment card

Source : Business Times – 25 Nov 2009

But resurgence in speculative activity not likely in short term, says CDL boss

Property tycoon Kwek Leng Beng feels that the authorities could raise the downpayment on the purchase of private homes if there is a risk of resurgence in speculative activity.

Currently, home buyers make a 5 per cent minimum cash downpayment.

‘The downpayment payable . . . can be increased to reduce the amount of speculation. This amount can be increased further should the speculation go unabated,’ Mr Kwek said this week in an e-mail response to BT’s questions.

He had been asked what steps the government could potentially take if a speculative bubble builds up again, following a recent statement by the Monetary Authority of Singapore that the risk of renewed escalation of property speculation could not be discounted.

In the short term, however, Mr Kwek said he does not envisage a resurgence in speculative activity, noting that developers’ sales have slowed for three consecutive months since peaking in July this year.

On Nov 9, the Monetary Authority of Singapore said further action to cool the property market may be needed if recent measures to dampen speculation prove insufficient. It said ‘the risk of a renewed escalation of speculative momentum cannot be discounted’ as Singapore emerges from recession and with the market expecting low interest rates to persist for some time.

‘Going forward, price levels and transaction activity bear close monitoring,’ it said.

Mr Kwek, who is executive chairman of City Developments Ltd (CDL), was generally more measured in his outlook on the Singapore private residential sector in his latest interview than he had been during CDL’s half-year results briefing in August.

He now says the Singapore private residential market ‘will slow down’ following the MAS warning and reinstatement of the confirmed list next year. ‘The integrated resorts (IRs) will not affect the real estate market immediately, unless the world economy recovers substantially when the IRs open, which is not likely.’

In August, Mr Kwek had sounded more optimistic about how the opening of the two IRs with casinos next year will provide a fillip to the Singapore property market, especially luxury homes, citing the experience in Macau.

The pronouncement from Singapore’s de facto central bank this month on the possible risk of a revival of property speculation came just three days after the Ministry of National Development announced it will offer eight sites that can potentially generate 2,925 private homes (including exec condos) for sale under the confirmed list in H1 2010.

The quantum was bigger than what most developers had expected.

‘I was rather surprised by the quantum of the confirmed list but I can understand the government’s explanation for introducing the number of land parcels in the confirmed list,’ Mr Kwek told BT this week.

In announcing the confirmed list, MND noted that the private residential market had seen ‘very strong demand’ from February to September, with developers selling about 12,800 units in the first nine months of this year, against just 4,300 units for the whole of 2008.

The government has also sought to assure market players that there is ample supply and that there is no need for buyers to rush their purchase decisions.

In September, the government scrapped interest-only housing loans and the interest absorption scheme, which some market watchers blamed for stoking speculation.

After last year’s global financial crash, developers began to enjoy a revival in home sales starting in February, peaking at 2,772 units in July. Sales have since slowed, easing to 811 units in October.

Mr Kwek also said the Singapore hotel market will improve in 2010. ‘But by how much and how quickly will depend on the initial success of the IRs . . . The hospitality industry will be directly affected – either adversely or favourably – by the IRs,’ he added.

CDL owns 54 per cent of Millennium & Copthorne Hotels plc, which in turn has a stake in CDL Hospitality Trusts – the biggest owner of hotels here.

Whne the economy recovers, the Singapore office market will rebound in tandem as business picks up in the various sectors, Mr Kwek said. Already, the decline in office rentals is moderating and the sector is seeing an increase in leasing activity and requests for proposals from occupiers, many of which are likely to firm up in the near future.

When asked if financial industry players in the West are likely to resume their pre-crash strategy of developing hubs in Singapore, Mr Kwek said: ‘They have to address their own problems first and put their institutions on sound footing before they start to relocate and to expand.

‘They cannot ignore the Asia-Pacific region, and I believe they also can’t ignore Singapore, which has built up equity in its brand,’ Mr Kwek said.