Public + private = property prices

[mr funny]

http://www.businesstimes.com.sg/sub/...79616,00.html?

Published April 3, 2010

Commentary

Public + private = property prices

Call for laissez faire approach by govt to property market is disingenuous

By ARTHUR SIM


WITH both public and private property prices continuing to rise in tandem, developer Simon Cheong's call last week for private property prices to remain unfettered by government intervention seems not only contradictory but perhaps also misguided.

Property developers have long had a constructive relationship with the government.

Indeed, the reserve list system of the government land sales (GLS) programme was largely created in consultation with property developers and the Real Estate Developers' Association of Singapore, of which Mr Cheong is currently president.

In 2003, the government even suspended the confirmed list of the GLS - which allowed developers to unload their inventory of unsold housing units without additional competition from new sites.

In H1 2004, with the suspension of the confirmed list still in effect, only 2,755 housing units were potentially available through the reserve list. By H2 2004, this number fell to 2,600 units.

The subsequent limited supply of new developments played a part in the run-up to the property price peak in 2007, and certainly helped developers boost sales and profits.

So to say now that the government should be taking a laissez faire approach to the property market is disingenuous. One cannot welcome government intervention to support property prices in bad times, but call for a hands-off approach when property prices are rocketing.

It is true that the government is intervening to control private property prices in the current boom.

For H1 2010, for instance, it has made available land for up to 10,550 housing units through the GLS with sites on both the confirmed list and the reserve list.

Mr Cheong, in an impassioned speech, suggested that not all Singaporeans are entitled to aspire to private housing. After all, he argued, private property only serves about 16.5 per cent of the population, so why does it need to be 'affordable'?

But the line between the two segments is not so neatly drawn.

For many Singaporeans, including some who live in private property, wealth creation comes from the sale of their public housing flats. So every upgrader who has ever sold a public housing flat for a profit to buy a condominium has had a hand in supporting prices in the private home market. That is why resale public home prices are often seen as the price base for private housing units. And developers have benefited from the aspiration of many Singaporeans to upgrade to private property.

Property consultants DTZ found that in 2009, buyers with public housing addresses accounted for 41 per cent of total buyers, almost double the 22 per cent in 2007 (when higher-end projects were leading the rise in the market).

With private home prices rising, DTZ found that private housing had become less affordable with its housing affordability index rising 13 per cent. This could push up demand and prices for relatively cheaper resale public flats which, in turn, could price other buyers out of that market, with knock-on consequences on demand for new public flats.

The private and public housing sectors are closely interlinked, which is why the government looks at the property market as a whole. Mr Cheong was right only when he said that property prices are a 'sensitive topic'. But for him to suggest that the private property market is 'exclusive' (in all senses of the word) is just off the mark.

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[mr funny]

http://www.businesstimes.com.sg/sub/...70340,00.html?

Published April 7, 2010

LETTER TO THE EDITOR

Don't pamper spoilt property buyers


I REFER to the commentary 'Public + private=property prices' (BT, April 3-4).

I would like to make two points on the writer's view that if private property prices go up, public flat prices will have to follow and hence intervention is needed.

1. Resale mass market condos are still affordable: First of all, mass market private property prices in Singapore over the past decade have hardly kept pace with even economic growth. While most countries enjoyed a property boom from the mid-1990s (post the commercial property bust in the US of 1990-1993) until the financial crisis of 2008, Singapore property prices peaked in 1996 and were in the midst of a long bear market until 2006; only in mid-2007 did the mass market condo segment start showing any signs of life. This very short rally from mid-2007 to mid-2008 was cut brutally short by the financial crisis. The property markets are now merely continuing from where they left off in mid-2008. The quarter-to-quarter comparisons that are so favoured by analysts and the media look high only because of the very low base and the fact that the market has to make up for quite a bit of lost ground over the past decade.

My point above is supported by the fact that resale condo prices are still very reasonable and not out of reach for upgraders. To illustrate, I would like to draw your attention to several good-quality condos near amenities in the Upper East Coast area such as Stratford Court, Villa Marina and Eastwood Green that are still available and have transacted recently in the $600 psf range - which means a spacious 1,200 sq ft condo can be bought for less than $800,000. Can someone explain to me how this is a bubble? In a truly overheated market (for example, London before the crisis), even resale flats receive several bids, sometimes even higher than the asking price.

The fact that new launches such as The Vision are selling at more than $1,000 psf only proves the herd-like mentality of unsophisticated buyers and not the fact that there are no affordable condos. If upgraders choose to buy at higher prices from developers, it is their problem and not one that requires government intervention. New launches cannot be used as benchmarks for the condo segment as a whole when nearby older properties are trading at a 20-30 per cent discount. There is still ample supply in the secondary market, as around half the condos bought in Singapore are for investment purposes and not for owner occupation. Ignoring this source of supply and continuing to release more land will result in an oversupplied and depressed property market similar to what we saw after the Asian crisis.

2. Buyers are too choosy and need to adjust to new realities: It has been proven several times by the government that buyers reject most flats offered to them for the flimsiest of reasons such as low floor, far from schools, etc, and then they claim that affordable property does not exist. Pandering to such 'spoilt' buyers is not the way forward. In major cities such as London, New York and Chicago, a workplace commute of around one hour is the norm; so will the case be here as prime-location property gets priced higher.

In a nutshell, every type of property - whether it has a poor view, faces the sun or is on a low floor - has its own price set by supply and demand. Buyers need to be mature and accept this fact rather than go crying to the government and asking for intervention. The government is already doing more than its share by selling subsidised built-to-order flats. Demanding cheap resale flats and condos on top of that is a bit too much.

Bobby Jayaraman


Arthur Sim replies: HDB data revealed that in Q4 2009, COV (cash-over-valuation) for resale flats was $24,000, double the $12,000 for Q3 2009. This does not represent a stable resale market. The median COV amount continued to rise in Q1 2010 - up $1,000, to $25,000.