View Full Version : Why are property prices still elevated?
Amber Woods
15-02-16, 11:13
Why are property prices still elevated?
Developers have strong holding power.
Cooling measures have gripped Singapore’s property market for the past two years, and yet prices have still not dropped enough to make policymakers ease the measures.
Analysts note that private residential prices remain relatively elevated because of a number of factors, but particularly because developers have solid balance sheets and strong holding power after locking in robust sales over 2010 to 2013.
A report by DBS said that this gives developers room to sit out the current down cycle without aggressively cutting prices.
“Strong developer balance sheets and low interest rates have kept price decline more gradual. We believe that this is due to (i) developers' strong balance sheets and holding power after locking in strong sales over 2010-2013; and (ii) still low borrowing rates, which allow investors and homeowners to prefer holding on to their units and not sell, given low opportunity costs,” said DBS.
Meanwhile, CBRE said that developers are not prepared to cut prices because projects currently in the market involve high land and construction costs.
"Developers preferred to pay a tax to extend the time to sell a project over cutting prices," CBRE said.
CBRE expects the residential market to stay muted this year, as the rising interest rate environment and slowing economy will continue to exert pressure on prices.
- See more at: http://sbr.com.sg/residential-property/in-focus/why-are-property-prices-still-elevated#sthash.eqiwRRMp.dpuf
Foreigners still buying OCR private properties to compete with Singaporeans.... :drinking_coffee_ico
Why are property prices still elevated?
Developers have strong holding power.
Cooling measures have gripped Singapore’s property market for the past two years, and yet prices have still not dropped enough to make policymakers ease the measures.
Analysts note that private residential prices remain relatively elevated because of a number of factors, but particularly because developers have solid balance sheets and strong holding power after locking in robust sales over 2010 to 2013.
A report by DBS said that this gives developers room to sit out the current down cycle without aggressively cutting prices.
“Strong developer balance sheets and low interest rates have kept price decline more gradual. We believe that this is due to (i) developers' strong balance sheets and holding power after locking in strong sales over 2010-2013; and (ii) still low borrowing rates, which allow investors and homeowners to prefer holding on to their units and not sell, given low opportunity costs,” said DBS.
Meanwhile, CBRE said that developers are not prepared to cut prices because projects currently in the market involve high land and construction costs.
"Developers preferred to pay a tax to extend the time to sell a project over cutting prices," CBRE said.
CBRE expects the residential market to stay muted this year, as the rising interest rate environment and slowing economy will continue to exert pressure on prices.
- See more at: http://sbr.com.sg/residential-property/in-focus/why-are-property-prices-still-elevated#sthash.eqiwRRMp.dpuf
Amber Woods
15-02-16, 14:52
Foreigners still buying OCR private properties to compete with Singaporeans.... :drinking_coffee_ico
That is why these property consultants and analysts chose to remain silence on this and instead give other obvious reasons to support the elevated prices.
That is why these property consultants and analysts chose to remain silence on this and instead give other obvious reasons to support the elevated prices.
Firstly, do you expect a business to sell it's goods below cost price, or merely to break even? If I am the business owner, I would rather declare myself bankrupt than to provide a free or loss making business.
Secondly, what about the huge income gains of 35% since 2009?
I miss my SGD 1,000,000 from 2006 to 2010. So boring nowaday in the property market.
That is why these property consultants and analysts chose to remain silence on this and instead give other obvious reasons to support the elevated prices.
Some property consultants job also shaky now..heard job cutting and no pay for some full time salaried consultants on going now.. Think market really no good.. They have been letting go staff on the quiet..
Amber Woods
16-02-16, 11:11
Some property consultants job also shaky now..heard job cutting and no pay for some full time salaried consultants on going now.. Think market really no good.. They have been letting go staff on the quiet..
During the good time, these consultants would add oil to the fire and try to make the market even hotter. Now, these consultants are trying hard to be positive and even suggest that there are some bright spots and the market is expected to turnaround soon.
Full time salaried consultants and lawyers are most severely hit during the down cycle. However, we must not forget that they were handsomely rewarded with huge bonuses during the good days. These bonuses could last them for many years. They are professionals and know how to invest their earnings to tide over bad time. There is no need to worry about them. They still drive their BMWs and live the high life.
Some property consultants job also shaky now..heard job cutting and no pay for some full time salaried consultants on going now.. Think market really no good.. They have been letting go staff on the quiet..
This is likely part of Singapore's game plan to move the employment towards more fruitful occupations. Property consultants as a whole do not contribute that much towards productivity.
Not so easy to declare bankruptcy lahhh...
When supply exceeds demand in a perfect elastic market, the price will fall and a business may have to sell its good below cost or breakeven... fundamentals of economics.
obviously, ppty market is not so elastic and hence there will be a lagging effect.
Firstly, do you expect a business to sell it's goods below cost price, or merely to break even? If I am the business owner, I would rather declare myself bankrupt than to provide a free or loss making business.
Secondly, what about the huge income gains of 35% since 2009?
That is true for unregulated markets. But many of the businesses were impacted by measures that intervene with the demand after their projections and bidding. For example, the TDSR implemented in June 2013. And also changes to the quantum of ABSD.
They are not like car businesses that can import less vehicles if the demand wanes due to cycles or regulations.
If the specific developer had gained in previous up cycles then there is some rationale to ask them to suffer losses. If not, it is hard to justify this.
Not so easy to declare bankruptcy lahhh...
When supply exceeds demand in a perfect elastic market, the price will fall and a business may have to sell its good below cost or breakeven... fundamentals of economics.
obviously, ppty market is not so elastic and hence there will be a lagging effect.
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