Singapore luxury condos under pressure
by yap leng kuen, September 22, 2014 MYT 7:37:55 AM
THE observation that a higher percentage of luxury condos in the Singapore resale market is selling at a loss, points to the ancient truth that what goes up must come down.
Describing these buyers as “swimming naked,” the Singapore Business Times (SBT) said they have to sell at a loss as they do not have holding power for their extravagant purchases.
Quoting data compiled by STProperty.sg from URA Realis, SBT said 7% of transacted units in the prime districts 9, 10 and 11 sold at a loss in the first eight months of this year, up from 5.5% over the same year-ago period.
Fewer people are profiting from their resale too; only 62.2% enjoyed any capital gains – a steep drop from 83.5% a year ago.
And 4.5% sold without making a profit or a loss versus 0.4% a year ago.
Yields are also under pressure. The low-rental environment is leaving more owners struggling to repay their mortgages, said SBT.
Buyers bank on demand from expatriate lessees, most of whom enjoy staying near the city. But with corporate housing budgets having shrunk post-financial crisis, these foreign workers are moving instead to the city fringes and suburbs, with some even renting HDB flats, said SBT.
Some are selling out not because they cannot afford the repayments; they are rebalancing their portfolios in view of the cooling measures imposed by the Government.
Others have already made their money in property investments overseas.
Bloated asset prices will have to come to a more sustainable level before the situation gets out of hand.
Rosy markets do not last forever and especially the non-owner occupied property sector falls under one of those fickle cycles.
The stepping up in rhetoric on rising home prices and warning against debt in Australia shows that the authorities are keeping watch on potential asset bubbles.
“For investors in housing, the pick-up in housing credit growth had been more pronounced than for owner-occupiers, with investor demand particularly strong in Sydney and to a less extent, in Melbourne,” said Reuters, citing minutes of the Reserve Bank of Australia (RBA) board meeting on Sept 2.
Additional speculative demand could amplify the property price cycle and increase the potential for property prices to fall later.
Home prices grew by almost 11% in the year to August, driven in large part by demand for investment properties, said Reuters.
Quoting assistant governor Christopher Kent, Reuters said low interest rates and robust population growth were underpinning demand in the housing market.
This note of caution from the RBA follows an earlier observation by the International Monetary Fund on the need for controls on risky bank lending and high property prices in Australia.
It signals that the RBA is potentially joining the regional watch on rising property prices.
Lawsuits related to losses incurred as far back as 2008 are appearing in the east following massive penalties and claims imposed by the regulators in the west.
Hong Kong’s securities regulator is suing Chinese conglomerate CITIC Ltd and five former directors, seeking HK$1.9bil (US$245mil) in compensation for investors over alleged misconduct linked to losses on the Australian dollar in 2008, said Reuters.
The Securities and Futures Commission (SFC) wants to compensate up to 4,500 investors who purportedly lost money as a result of wrong-way bets CITIC made on the Aussie dollar at a time it was investing heavily in the US$9.6bil Sino Iron project in Western Australia.
The regulator had alleged that CITIC issued a circular on Sept 12, 2008, that contained a false or misleading statement about its financial position, said Reuters.
CITIC, then known as CITIC Pacific, said in the circular that its directors “were not aware of any adverse material change” in the group’s financial position.
But five weeks later, it disclosed a loss on a number of leveraged foreign exchange contracts, causing its share price to plummet.
The mark-to-market losses of around US$2bil came as a result of the foreign exchange position that the company had taken out to hedge currency exposure resulting from its Australian iron ore mining project, said Reuters.
CITIC, in a statement, said it was seeking legal advice.
Although it has not been as active as its Western counterparts in doling out penalties and lawsuits, the Hong Kong regulator is keeping watch over investor complaints.
Being a major financial centre, Hong Kong would have its fair share of similar investor issues and companies with such investor exposure should brace themselves for any potential investigation.
Columnist Yap Leng Kuen notes the quick adjustment to property asset bubbles in the region
http://www.thestar.com.my/Business/B...resale-of-the/