SINGAPORE (Feb 7): Nearly two years after the July 2018 round of property cooling measures, the private residential prices have stabilised, loan growth held steady, and excessive speculative heat snuffed. The woes of asset bubbles -- suffered by home buyers in markets such as Hong Kong and London – are absent as far as private Singapore residential housing is concerned. If they could, Singapore’s policy makers would do a victory lap, but keeping a hawk eye over the market is what they are still doing and will remain so.
Now, with a slowing global economy, to be worsened by the recent coronavirus outbreak, industry players are renewing their calls for some of the cooling measures to be reviewed.
Prices increased by just 0.5% between Q4 and Q3FY2019, compared to a growth of 1.3% between Q3 and Q2 in the same year.
According to JLL Singapore, the Singapore residential market is in a good shape thanks to regulation put in place over the past decade. “While this may not provide any opportunity for fast capital gains, we believe it also ensures the downside risks are limited,” reads a recent JLL report. “Despite the hefty additional stamp duties that were increased in July 2018, residential volumes remain healthy this year and prices are rising mildly.”
Interestingly, the property market has remained so stable to the extent that in 2018, the Central Provident Fund, the retirement scheme derided by many smart money types as stodgy and boring, gave better returns of 2.5% compared to the paltry 2.2% eked out by investment in private properties. The results were based on an analysis by UrbanZoom of 470,000 transactions since 1995.
Time to ease?
Among all industry players, PropNex CEO Ismail Gafoor probably experienced the impact of the cooling measures more so than anybody else. PropNex was trading as a public company for just three days when the government stunned the market with yet another round of cooling measures. Investors who bought PropNex at its IPO price of 65 cents quickly suffered a 20% loss. Speaking at a forum last year, Gafoor recalls being at the receiving end of angry investors threatening to sue. They assumed the government must have given him a heads-up before announcing the measures, and that PropNex, by launching its IPO just days before, is complicit in hurting unsuspecting subscribers to the IPO.
In hindsight, Gafoor can now say that PropNex, the largest real estate broker, has captured a bigger market share than it had prior to the implementation of the measures. However, the industry at large continues to suffer from dent sentiment.
Gafoor is of the view that the measures are only there to calibrate the property market accordingly, and cannot be there forever. “From an industry’s perspective, there has been a huge slowdown in new launches. Some of the developments did not even sell 10% in the launch weekend,” Gafoor tells The Edge Singapore, citing the launches of residential properties like Leedon Green as an example. “This is a concern, the cooling measures are already showing constraints on the number of buyers coming to pick up the units.”
“With the recent global economic slowdown, US-China trade tensions and the coronavirus outbreak, I think a little leeway in the real estate sector will be welcomed by developers, upgraders, and investors alike,” says Gafoor.
He has a couple items on his wishlist for the coming Budget. Firstly, the 12% ABSD slapped on Singaporeans purchasing a second property should be cut back to the previous level of 7%, although if he can have his way, 5% is the “ideal”. “Singaporeans should be given the privilege to buy a second property in Singapore without the high additional charges, rather than taking their funds to another country, which offers them less protection,” says Gafoor.
He is also urging for the extension of the five-year timeline for the completion of the development projects. “Because of the expected slowdown, extending the timeline from the current five years to six years (for projects with less than 500 units) and seven years (for projects that have more than 500 units) will give developers more time to sell all the existing units, which is a better approach,” he explains.
Shifting gears?
To be sure, calls to review cooling measures were made frequently, by both developers and consultants alike. Thus far, the government has stood its ground. Just over half a year ago, MAS managing director Ravi Menon, in response to yet another round of such calls, pointed out that the measures need time to be allowed to work their way through the system.
“We have not seen any impending risks of a sharp selloff or collapse, and there seems to be a good balance that’s holding up the market,” said Menon. “So I don’t see a need to shift gears significantly.”
Gafoor isn’t too optimistic that the coming Budget will be the time for this shifting of gears to take place. “While I’m hoping the authorities will consider scaling back on the property cooling measures, I’m doubtful of these announcements being made in the upcoming budget,” he says. “The cooling measures have done the expected, they have achieved the intended outcome. We now need to adjust these measures accordingly,” he adds.
