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by Property Soul

What a roller-coaster week for Singapore’s real estate market.

It is a surprisingly well-coordinated good show put up by the Singapore government, complemented by the parts played by different stakeholders in the industry, with an unexpected ending of the cooling measures announcement.

The show leading to the announcement

Day 1: URA Q2 Estimate and PropNex IPO

The show kicked off on Monday when URA showed an increase of 3.4 percent in its flash estimate’s of 2nd Quarter 2018 private residential property price index.

The media reported the good news and the analysts cheered for another good year for the property market.

In the meantime, PropNex raised S$40 million in IPO which was 24.6 times oversubscribed by the public, despite controversies over transfer fee and revenue discrepancy.

Day 2: Government Land Sales

The next day saw URA awarding the 99-year Hillview Rise site to Hong Leong Group which paid the top bid of S$460 million and promised to deploy a few innovative technologies to boost productivity. This echoed with last week’s GLS announcement that four new residential sites and seven more on the reserve list will be launched.

Day 3: MAS Warning

On Wednesday, Monetary Authority of Singapore (MAS) chief Ravi Menon made use of the occasion at the MAS annual report media briefing to deliver his speech on “there is euphoria in the Singapore property market”, specifically warning developers, individual buyers and banks “to be sober, to be balanced and exercise good judgement”.

Day 4: New Cooling Measures

DBS CEO Piyush Gupta told the audience at a luncheon that “MAS is getting nervous, And also, from my understanding is the URA” and “it’s something to keep an eye out on”.

The time was finally ripe to push the new cooling measures to the market in the evening, with raising of 5 to 10 percent for Additional Buyer’s Stamp Duty (ABSD) and lowering of 5 percent for Loan-to-Value (LTV).

Desperate developers rushed to open yet-to-be-ready showflats. Some offered 5 percent discount until midnight. Desperate buyers under panic attack of FOMO flocked to Riverfront Residences and Park Colonial showflats for last minute shopping.

Day 5: The Aftermath

Shares of developers, property agencies and local banks tumbled. Analysts who were euphoric earlier this week changed their tone 360 degree to moan for worst possible scenarios under the new cooling measures.

Like I said in my earlier blog post “Singapore property game: The winner takes it all”, “a game is fun when everyone can take turns to play”.

In this case, I am not sure whether “all the players have equal chances of winning” or “whether it is a fair battle for all”. But at least, it is a fun game to play for the obvious winner.

Adding a Singapore stop to the Cooling Measures World Tour

From last year, there are property cooling measures countries around the world have with the slap of foreign buyer taxes and lending restrictions, Including Canada, Australia, New Zealand and China. Last week Hong Kong just imposed new vacancy tax on developers’ unsold units.

But unlike the red-hot property market in these countries, Singapore’s private property prices have yet to fully recover to reach historical high, while foreign buyers (including foreigners residing in Singapore waiting for their PR) only account for 6 percent of total private sales transactions last year.

Is it necessary to join the world’s party of cooling measures, when Singapore shares have just dropped over 10 percent, and stage a 4-day show to give the market another big shock – if not for the preparation of the coming election?

Though we all understand that, in a well-governed country like Singapore, the only two real complaints by the citizens are MRT breakdowns and private home prices not coming down.

We need players to stage a show

Our government decided that the show must go on. And it won’t be such a good show if not for the voluntary participation of different players.

Did the URA figures indicate that the market is looking up?

Well, it depends on how you interpret the data. A 3.4 percent increase this quarter could imply that growth has slowed down from the 3.9 percent climb last quarter.

Where are the increase in prices and jump in volumes coming from?

Prices of new launch projects are set by developers at a premium above existing market prices. The price per square foot is easily 25 to 40 percent above market valuation of units in nearby projects.

There is no major launch in Q1 except the Tapestry. Just in April and May, we had the launch of Rivercove EC, The Verandah, Park Place, Twin View and the relaunch of a few projects in subsequent phases. These launches help to drive up volumes and stimulate sales in the market.

Developers are the ones that sell new projects at “future prices”. This is at most a self-fulfilling prophecy. Why would anyone be surprised to see prices increase 3.4 percent in the last quarter?

But like every time without fail, the media couldn’t help interpreting it with euphoric headlines such as “highest spike in private property prices since 2014”; the industry stakeholders couldn’t help wearing the hats of fortune tellers to predict the property market to grow 8 to 20 percent this year.

We understand that the media is looking forward to more new launches, more property advertisements and higher advertising revenue. But they are playing their usual role without realizing that this time they are falling into the trap to pave the way for tougher buying restrictions from the government.

The research head of a property agency once told me that he has stopped picking up calls from the reporters a long time ago. Why bother? They are only looking for certain quotes from you to reinforce what they say in the articles.

By the way, did anyone read the last sentence in the URA 2nd Quarter 2018 flash estimate press release? It said “the public is advised to interpret the flash estimates with caution”.

More walk-ons joining the show

But we need some extras in a show – those walk-ons in the street scenes of a movie or the background of a performance with no speaking line. But this time, instead of being paid, the extras pay to appear in the show.

Undecided buyers who lack individual judgement are always looking for a sign to tell them what to do. With the government’s sudden addition of ABSD and tightening of LTV, they immediately saw this as “the sign” they have long been waiting for.

To beat the July 5 23:59 deadline, developers that just acquired sites at record prices were desperately getting rid of as many hot potatoes as they could. Some developers were bringing forward the launches a couple of weeks in advance.

So we have a few not-so-ready to launch new projects selling to a group of anything-also-buy homebuyers. Property is probably the most expensive thing people buy in their life, with a few hundred thousands or over a million dollar price tag, to be payable over the next 25 to 30 years.

Do these buyers really know what they are buying? Do they know what they are doing?

On 28 June 2013, MAS announced the 8th round of cooling measures with the implementation of the detrimental Total Debt Servicing Ratio (TDSR).

Anyone remember how the buyers rushed to sign the Sales & Purchase Agreement and exercise the option in order to beat the midnight deadline? What happened to these buyers now? They found that they have bought at the peak of the market.

There is no point taking the offer of 5 percent discount from the developers. Who knows how big the discount they are giving to future buyers to clear the rest of the units?

If tomorrow the developer offers 6 percent discount to buyers, they might as well forfeit their 5 percent booking fee. Why? There is no point holding onto the unit when they can buy it cheaper now.

If tomorrow the developer offers 21 percent discount to buyers, or prices drop 21 percent, their units immediately become a negative asset with outstanding loan (20 percent) higher than the market value. That is when the bank asks them to top up the difference in cash.

I don’t make this up. The same situations happened before in 1998 and in 2008.

Never buy on the way down. You never know what’s going to happen next. You don’t want to buy today and see prices drop tomorrow. And no one can tell when the drop is going to stop.

– Property Soul, “Property investment in uncertain times

Why listen to property agents? They often prove themselves wrong.

Remember those who bought under the Deferred Payment Scheme, stay-then-pay programme or two-year lease option? If they still want to keep the units, now they have to pay 4 percent buyer stamp duty and 5 percent more ABSD, but with 5 percent lower LTV.

What I didn’t get is: Didn’t the government just announced the launching of four new residential sites and putting up another seven sites on the reserve list? With two other “white sites”, we can potentially build a total of 10,745 new private units. And that is on top of 44,261 units that are already in the supply pipelines.

Where is the rush to buy?

It is a game afterall. Whether you choose to play or not, it is up to you.

– Property Soul, “Singapore property game: The winner takes it all

I know I still haven’t touched on the developers and the banks which are two key players of the show. But it’s time for intermission. Let me share with you how they will contribute to the scenes of the property market in my next podcast from my youtube channel. Come back after the intermission to watch part two of the show.

This article was first published at and reproduced with permission

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