Published March 1, 2007

Property market on a roll?

BY ALL accounts, Singapore's property market is on a roll. Or at least recovering strongly. Not just in the luxury end, where prices seem once again to have hit stratospheric levels in recent months, but, according to industry pundits, the mass market too within the year.

Perhaps the festive occasion - the Real Estate Developers Association of Singapore's (Redas) Chinese New Year celebrations - fuelled his buoyant spirits, but Simon Cheong, the newly-elected Redas president, could not have been more bullish. All cylinders are now firing away, he declared. He cited recent structural and policy changes, including the latest corporate income tax cut and projected population growth, which, he said, point to a sustained uptrend in the property market. Even the en bloc fever of late is seen as a boost that will keep high-end residential prices on the rise, contrary to fears among some developers that the slew of collective sales will lead to a massive oversupply of land and upscale homes. At most, according to Mr Cheong, the luxury housing market could take a breather (though he does not see that happening in the next three years) before moving up again. Interestingly, Redas was earlier said to have lobbied the government to reduce its land sales because of supply from en bloc sales. Mr Cheong also sees the price recovery filtering down to the lower tiers of the market this year. While that hasn't quite happened - high-end prices have surged as much as 50-70 per cent in the last 18 months but mass-appeal mid-market prices have been decidedly more languid - another barometer, the HDB rental market, has risen strongly. Rents for HDB flats in some districts have climbed more than 40 per cent in the past 12 months, riding on the rise in the private market. To be sure, there has been quite some upbeat talk in the market. And perhaps it may not all be unsubstantiated, given the (scattered) rebounds in the URA's property price indices and rental indicators. That, plus the return of thronging crowds at property launches, as well as apparent record prices and sellouts at upscale projects, have led some to pronounce the beginnings of 'another bull run'. Others reckon that these new price highs are sustainable for at least the next 24 months. And policymakers and pundits alike have been quick to talk down any concern about speculative buying, maintaining that perhaps 10 per cent of buyers in the niche luxury market 'flip' their purchases.

But there is another side to the story, quite apart from the fact that the middle and lower ends of the property market haven't bounced back as robustly as the top tier. Developers love to proclaim 'fully sold' early in their project launch, but it is apparent that not everyone who picks up an option to buy goes ahead with the purchase. Of the more than 100 collective site sales launched last year, about one-third either fell through or remain on the market after failing to achieve reserve prices. Ultimately, economic fundamentals rule the day, and Singapore's outlook is the brightest in years. Still, for the property market, which counts on foreigners for support, one might also ask: Are expatriates coming in droves?