TR EMERITUS

By Khalil Adis [Khalil Adis a former editor of Property Report. He now writes for Property Report, Property Guru and Temasek Review] 2009 has been a roller-coaster ride for Singapore’s private property market and 2010 will be an equally challenging year for the HDB resale market. A topsy-turvy year 2009 has so far been a year of paradox for Singapore’s private property market which first recorded the worst fall in history in property price index in the first quarter of 2009 followed by a stunning V-shaped recovery with the sharpest increase in a decade in the third quarter. The first quarter witnessed the price index dropping 14.1 percent quarter-on-quarter. However, just two quarters later, the private residential market posted a 15.8 percent increase, data from the Urban Redevelopment Authority’s (URA) showed. According to the URA’s data, prices of non-landed private residential properties increased by 15.2 percent in the core central region, 18.5 percent in the rest of central region and 16.1 percent in the outside central region in the third quarter. In comparison, prices of non-landed private homes decreased by 5.2 percent, 4.4 percent and 2.3 percent in the core central region, rest of central region and outside central region respectively in the second quarter. This sharp V-shaped recovery has prompted fears that a property bubble was forming and that property prices in Singapore have become too inflated driven by low interest rates. So in September, the Singapore government took measures to cool down the property market by making it harder for homebuyers to defer payments by removing the Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL) and releasing more land. Before the intervention, property showrooms were filled with agents armed with blank cheques acting on behalf of speculators. This has resulted in escalating property prices, which has put genuine homeowners at a disadvantage. Property firm DTZ notes that the price hikes since the second quarter of 2009 has resulted in diminishing buying power of Housing Development Board (HDB) upgraders. The proportion of purchasers with HDB addresses has declined to 37 percent in the third quarter of 2009, from the recent peak of 56 percent in the first quarter. Anti-speculative measures have worked The escalating prices, driven by speculators, are a cause for concern as recent data from the Ministry for Trade and Industry (MTI) shows that Singapore is just fresh out of a recession. Analysts say removing the IAS and IOL schemes will bring stability to the property market, in line with the country’s economic growth. “The measures are aimed at stabilising the market and not letting prices runaway from the reality of an economic downturn. Any rise in prices should commensurate with the rate of economic expansion,” says Donald Han, managing director for Cushman & Wakefield Singapore. Two months later, analysts agree that the government’s anti-speculative measures have worked to some extent. “The government’s strong stand on the need for anti-speculation, coupled with its prompt and immediate response to the rapidly heating market (IAS removal and land release), is what has brought sanity to the property market by weeding out speculators and cautioning would-be private home owners,” says chief executive officer for PropNex, Mohamed Ismail. “The effect of the anti-speculation measures is targeted more at the buyers in the non-prime market who typically rely more financing to own a private residential property. The removal of Interest Absorption Scheme and Interest Only Loans also forced these buyers to be more prudent in their purchases as they are no longer allowed to defer their loan repayment. The reassurance of ample supply as provided by the government’s injection of sites into the first half of 2010 confirmed list, under the government land sales programme, has also softened the run-up effect,” says Dr Chua Yang Liang, head of research for Jones Lang LaSalle for Southeast Asia. Subsales down According to Jones Lang LaSalle, the overall monthly volume of purchases for October 2009 has declined by 29 percent from 1, 143 units in September to 811 units. This is the third contraction since August 09 and also the second lowest sales volume achieved for the first ten months of 2009 since January 09 when 108 units were sold. Jones Lang LaSalle also notes that this measure has resulted in a decrease in subsales – a measure of how much speculation there is in the property market. “ The recent announcement of measures to curb speculative behaviour seems to have taken effect as seen in the subsales market. Proportion of subsales level has fallen to 7.9 percent in October from the 12 percent recorded in September,” says Dr Chua. However, analysts say it is too early to tell if some measures, such as the interest-absorption scheme (IAS), should be restored, “The IAS removal only played a small part of the government measures. But even as such, we do not think it is necessary for IAS restoration within the next one year,” says Mohamed Ismail. Falling rentals While property prices were escalating in the third quarter, rentals continued to decline in the same period. According to the URA, the rental price index for private property has dropped 2.2 percent in the third quarter. “The rental price index has dropped 20.4 percent to its current third quarter level of 129.3, and its recent decline of 2.2 percent is actually its lowest decline in four quarters,” says Mohamed Ismail. Analysts note that rentals were declining, as landlords were willing to drop their rents during the recession. “Rentals for private properties could be explained by the fact that in the bad economy, landlords were willing to lease out their property for lower prices. Given that rental agreements last for an extended period of time, we should see a lag in the recovery of the rental price index behind the more visible recovery of the property price index,” says Mohamed Ismail. Therefore, the fourth quarter could see rentals going up in tandem with the recovering economy. 2010 and beyond Going forward, analysts expect sales volume for private homes to ease, as there are fewer mass-market projects in the pipeline plus the government’s measures to cool the property market. “Transaction volume in the non-landed segment is likely to contract by a further 10 to 20 percent due in part to the seasonal slow down and also the effect from the recent government announcements,” says Dr Chua. Home prices are also likely to see some level of stabilisation with more moderate increase to more sustainable levels with less volatility. This is because about 70 percent of the current buyers in recent residential launches choose the normal progress payment while the rest opted for the IAS. However, analysts warned that the Singapore government could impose more measures to cool the property market should price continue escalating. “Should housing price growth continue to surge ahead of economic fundamental despite these recent moral persuasion by the government to cool residential demand, further anti-speculative measures with a bigger bite could be introduced such as capital gains tax say for those who flip within a two year period of the first purchase,” says Dr Chua. In October, the Monetary Authority of Singapore’s (MAS) expressed concern that a speculative bubble could form, prompting them to take possible further measures, on top of the release of land announced recently for mass-market developments. Although the government has yet to announce such possible measures, prospective homeowners should assess their financial position before taking a plunge in the private property market. The HDB market outlook Following public criticism that there was not enough supply of HDB flats in the market, Minister for National Development Mah Bow Tan announced in parliament recently that the HDB will release 10, 000 to 12, 000 new flats every year for the next five years. By releasing more supply however, the HDB is caught between the devil and the deep blue sea. While releasing more flats will help quell the public’s frustration with the HDB, such measure will also bring down the value of HDB flats due to its market based pricing approach. “Although HDB is slated to release a total of 13, 500 Build-To-Order (BTO) flats this year (by the end of 2009), an oversupply would only serve to dampen the asset value of a majority of Singaporeans who are dwelling in HDB flats,” says Mohamed Ismail. Meanwhile, the HDB resale market will likely witness more transactions this year. Acording to Propnex, there is a continual supply of resale flats which could potentially see 40, 000 transactions this year alone. It adds that should the economy recover well, this could lead to greater demand in the HDB resale market due to a a greater number of Singaporeans being able to hold well-paying or stable jobs, or if there is a greater number of permanent residents in the market. Such news mean Singaporeans should brace themselves for escalating prices in the resale market next year – just at a time when elections are coming. The latest HDB Price Index (RPI) is now at a record high of 145.2 points - a growth of 3.6 percent over the previous quarter. About the Author: Khalil Adis was a former editor for Property Report magazine covering Singapore, Malaysia and Indonesia. During his course of work he has travelled to all three countries to cover their property markets extensively. He has also interviewed politicians like Singapore’s Minister for National Development Mah Bow Tan, Kuala Lumpur’s Mayor Dato’ Ahmad Fuad Ismail and Malaysia’s Energy, Green Technology and Water Minister Datuk Peter Chin. He now writes for Property Report, Property Guru and Temasek Review. You can read more of Khalil’s articles on: www.property-report.com and www.propertyguru.com.sg Other articles by Khalil Adis: >> Demand vs supply: so many applicants, but so few flats >> Home affordability: HDB versus the public  Read More →

Written by Our Correspondent Some Eunos residents have protested against HDB's lift upgrading programme in their estate by crossing out all the four options given to them during a meeting over the weekend with HDB. They are flat owners in Blocks 411, 415 and 417 in Eunos Road 5. The new lift shafts built as part of a lift upgrading programme last year ended up blocking their flats from sunlight and wind, making their homes dark and hot. The residents had taken issue with the layout and location of the new lifts when the plan was first revealed in 2006. Despite having numerous discussions with their MP Dr Ong Seh Hong, the impasse remains unresolved. HDB has proceeded to build the lifts with the new lift shafts becoming an eyesore in the vicinity. They are still uncompleted due to objection from the residents. During a meeting last Saturday morning with HDB, some of the residents surrounded HDB's deputy director of upgrading programmes management Chee Kheng Chye last Saturday morning, firing questions at him. The questions included why the lift shaft was built blocking most of the front door and one bedroom unit, when in a brochure given out to residents, the lift shaft had appeared different on the floor plan. The diagram, explained Mr Chee, is schematic and not drawn to scale. Residents said the suggested changes were too minor to make a real difference. This is not the first time that HDB's lift upgrading programme has become embroiled in controversy. A wheelchair-bound man by the name of Ryman Lim wrote in to TODAY last week complaining that the design of the new lifts at his Clementi flat is not wheelchair-friendly at all as all residents still have to climb up or down a half-flight of stairs to get from the corridor to the lift. He got a cool response from HDB when he tried to feedback his case to them: "When I approached the HDB, I did not expect such an indifferent response from them. The HDB insisted that the residents voted for a lift landing of this design, and the vote was final, with no special consideration to be given to wheelchair-bound residents like myself," he wrote. [Source: TODAY's Voices, 5 November 2009] The same deputy director Chee Kheng Chye replied three weeks later on 26 November 2009 that "there is a small number of blocks where direct lift access is not possible due to site or technical constraints." He ended his letter without offering any concrete help or support for the stranded resident: "We empathize with Mr Lim's situation, and seek his understanding on the LUP solution implemented for his block." [Source: TODAY's Voices, 26 November 2009] Lift upgrading programme was introduced to rectify an earlier design flaw by HDB whose lifts do not stop on every level. The upgrading will only go ahead if 80 per cent of the residents living in the precinct voted for it. For some strange reasons, few estates have rejected the lift upgrading programme so far. The government will pay the bulk of the upgrading with the residents chipping in the rest, usually ranging from a few thousand dollars to more than ten thousand dollars. The Lift upgrading programme is often used by the ruling party to threaten Singaporeans to vote for them during the elections. Residents living in opposition-held wards like Hougang and Potong Pasir have been denied essential upgrading of their flats for many years until lately.  Read More →

Dear Mr Shanmugam,   I refer to your speech at the New York state bar association dialogue as reported by the Straits Times on 30th Oct 2009.   In your speech, you referred to American economist Bryan Caplan's arguments that as a political entity, Singapore should be seen as a city and as far as cities go, America has its share of cities where one party has dominated over long periods of time, which in turn suggests that party dominance doesn't imply the lack of democracy.   Another example would be Microsoft's dominance of global computer operating systems.  People can choose not to use Microsoft, but they use Microsoft nonetheless.  Yet, some of Microsoft's practices have resulted in anti-trust proceedings by the US Department of Justice as well as the European Commission with the latter succeeding in getting Microsoft to unbundle both Windows Media Player and Internet Explorer from Windows sold in Europe because the practice is deemed as anti-competitive and unfair.   Hence, it is not dominance per say but unfair dominance that we should be concerned with.  Does the mayor of Chicago go around telling its constituents that unless they vote for the Democrats, they will not get to enjoy nation wide housing retrofitting benefits?  Does the mayor of Chicago lump six districts into one mega-district to be voted as one?  Are all newspapers distributed in Chicago owned by just one company the shares of which belong largely to state linked companies?  You will not find these unfair practices in Chicago, San Francisco or New York.  You can only find them in Singapore.  Only the issue of tying voting to HDB flat upgrading has been addressed barely months ago.  Hence, Bryan Caplan's assertion that pressure from the dominant party hardly matters is untrue.   While international observers have rated our government as one of the least corrupt, it should not escape their eyes that instead of taking money from under the table, they have resorted to taking money from above the table.  No other government in the world takes more money from above the table than our government.     Thank you     Ng Kok Lim  Read More →