Jan 17, 2010

Anatomy of a low-grade property fever

By Chua Mui Hoong, Senior Writer

There is a low-grade property fever going round and I've caught it.

Property fever is endemic in land-scarce, high-savings-rate Singapore. It comes and goes in waves.

Last year's actions by the Government to curb speculation and boost supply staved off what could have become a raging 40 deg C fever. The assurance of having eight residential sites on the confirmed list and another 16 on the reserve list, which together will yield about 10,550 units, also cooled demand.

Despite all that, the fever persists.

Property analysts can give you the big picture to explain the emerging property frenzy. The economy is turning the corner and expected to grow by 3 per cent to 5 per cent this year. The opening of the integrated resorts will give a fillip to the economy - if not in large gross domestic product terms, at least in consumer sentiment. And as everyone knows, the property market here is all about sentiment.

Which is why no cold statistics can give you a good sense of what it's like to be a Singaporean caught up in the property fever.

Here's how it is, from one febrile patient. I take my pulse and I know my property fever is back, but it's a mild one at 37.5 deg C.

Symptoms: I'm back to my bad old ways of scanning property classifieds and calling up agents to inquire about viewings and prices. Weekends are spent shuttling from one development to another, exploring potential buys.

My beleaguered support system of boyfriend, patient bankers, financial adviser and real estate agent has had to contend with my 'should I or shouldn't I' questions, come up with quick valuations of places I'm interested in, and send me quotations for loans I will take up when - and if - I take the plunge.

From a contented Housing Board flat-dweller, I am being converted by the day into a potential 'upgrader'.

I actually love my home, a quiet spacious HDB flat with 180-degree green views and lots of birdlife to watch from my windows. It's walking distance to markets and kopitiam, which to me are a quintessential part of HDB life. There's a swimming pool and neighbourhood gym minutes away.

And still, when the fever hits, I hanker after a condo. I want 24-hour security, an on-site swimming pool, sauna and steam room optional, a resident gym, tennis courts, BBQ pits and big balcony.

Meanwhile, HDB resale prices are hitting a record high. I get fliers in my mailbox every day showing a list of prices flats in the neighbourhood were sold for. I think: Maybe my tastefully renovated unit with gorgeous views will set a new record high for the area. Maybe my flat will be one of those featured in the papers, like that iconic $770,000 Bishan penthouse maisonette sold in 1997 that people still remember. And if I sell my flat high, all I need to do is top up another $300,000 to own my dream condo.

Meanwhile, my employer is restoring pay cuts. As behavioural psychologists will tell you, getting back $100 you lost gives you more happiness than if you had that $100 all along.

My modest investment portfolio has fewer minus signs to show losses. Some funds have even made gains. Suddenly, I feel rich. The condo itch surfaces.

But I had better act fast. Private property prices are rising steadily. They are higher today than they were a year ago, but have still not reached the levels of the 2007 mini-boom. Nor are prices in some developments as high as the last Big Boom of 1996/1997.

Quick, there's a window of opportunity. Seize the moment, grab that condo now while HDB resale prices are firm, before private property prices rise further and that dream home gets out of my reach!

There are many buyers thinking like this out there, rushing to clinch dream homes or dream investment opportunities, before private property prices spiral up. Never mind that the economy remains uncertain. Or that forecasters say the big supply coming onstream this year will moderate the market.

In fact, the Government has set aside enough land this year for 10,500 condominium units, with 87 per cent of these outside the central region, in suburban areas. This should soothe HDB upgraders, who form the bulk of buyers of these suburban condos.

As of the third quarter last year, 34,120 out of 59,700 private homes in the pipeline were unsold. As for young couples, the HDB is prepared to build 12,000 new flats this year if there is demand.

My head tells me supply is plentiful, so by the rational laws of demand and supply, prices should not rise unduly. I recall doomsayers who warn that the crisis is not over, and that the current upswing is the result of rescue action that merely papers over deep crevasses. Governments' debt positions due to massive borrowing for stimulus packages could ironically trigger further turmoil.

But the fever just tells me one thing: That dream home may be out of my reach in six months' time, or a year, if prices rise further.

One Saturday, I called up about a freehold condo unit in Upper Bukit Timah. I could not make the viewing that day and arranged to view it on Sunday. On Saturday night, the agent sent me an SMS to cancel the viewing. The unit had just been sold.

Last weekend, I viewed another apartment in the west. The next day, the agent told me it was sold. 'I had three offers in one day! Three! It's crazy. Why are people rushing to buy?'

I could have told her: 'Because they think prices are going up and they fear missing the boat.'

Would-be buyers know the property cycle is unpredictable. Miss the boat now and prices could continue on an upswing and remain high for years. It could be five years, seven years or more before that condo comes back within your reach.

And meanwhile? If you chose the wrong HDB estate to live in, you put up with smelly lifts, dog poo in void decks, and resign yourself to jostling with schoolchildren and ah pek in the $1-per-entry public swimming pool ($1.30 on weekends when you have to literally elbow people out of the way and mind your safety as swimmers literally kick in your face).

I have hospitable friends who tell me I can use their condo pool. Still, I think wistfully, how nice to live in a condo and swim at dawn, dusk or whenever the mood strikes, and throw BBQ and tennis parties (never mind if I hate standing over a smoking fire and that I don't even have a tennis racket).

I'm old enough to be mindful of the risks of a property purchase: falling prices and the risk of negative equity.

I also know the arguments against property as an investment in Singapore: low rental yields, the risk of rising interest rates, problems getting tenants or getting the wrong types of tenants, higher property tax and higher income taxes from rental income.

But the fever persists.

Now, if only I can find a sucker - I mean a buyer - to pay a record price for my HDB flat. Then I could swoop on one of those dream condo units before prices get out of reach. But I have to act fast!

Or I could stay put in my lovely home and let the fever subside.

As it surely will.

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