Playing the waiting game

February 10, 2012  

 

It has been nine weeks since the additional buyer’s stamp duty (ABSD) on residential property was imposed. Have private home prices made their long-awaited move downwards?

At this week’s Singapore Property Analytics Conference 2012, opinion from the floor – comprising mainly property agents – was divided. These are people who interact with buyers and sellers everyday. If prices have come off in a significant way, you would expect them to be among the first to know. Judging from the reaction of the majority, if prices did actually dip, they were probably too small to notice.

Flash estimates of the Singapore Residential Price Index (SRPI) released by the National University of Singapore a week earlier showed the sub-index for small apartments last December gaining 3.4 per cent from the previous month, while the sub-indices for the Central and Non-Central regions dipped 0.4 per cent and 1 per cent, respectively, taking the overall index down by 0.8 per cent.

Again, I ask: Is this the worst it can get? Can it only get better over time as the market gradually adjusts to the ABSD?

The SRPI tracks prices of completed private apartments and condominiums, excluding Executive Condos. With prices not coming off in a rapid and significant manner despite many days of headlines screaming of a sharp downward correction, the market has turned into a waiting game, with the number of participants growing by the month.

A news report published a few days ago suggested that the 10 per cent ABSD imposed on foreigners had not stopped expatriates from looking for well-priced buys. International buyers are still in the market even as they have been deterred by headlines that they have perceived as harping on the Government’s efforts to lower prices.

Property agents quoted said that foreigners decided to sit on the fence to await further clarity in the market. They went on to say that the immediate beneficiary was the rental market comprising private homes, serviced residences, as well as long-stay accommodation.

The agents pointed out that there had been a noticeable pick-up in the rental market activity following the ABSD. I can confirm this. Whether more deals were actually closed or not, I am not sure.

In fact, only two days ago, it was reported that data from the Singapore Real Estate Exchange (SRX) showed both rental rates per square foot and rental yields had gone up in the Core Central and Rest of Central regions since the implementation of ABSD.

Surprise, surprise. Only about a month ago, every comment on the rental market was negative, with many saying leasing volume for this year was set to drop and rentals were on their way downwards.

Honestly, it is really hard to call the rental market these days as the market is very fluid and very dynamic. It is continually reacting to market trends as reported in the news.

But I do not think that only the expatriates are playing this waiting game. Locals with an appetite for risk are into it as well. Some are selling their only home at the peak of the market just to rent. I also get readers asking me whether they should buy today as many people are advising them to wait.

Ironically, by choosing to rent, this waiting group is giving support to investors who would otherwise have to sell if they cannot lease out their apartments.

Another factor – one that helped support the private housing market last year – is showing up again. Two freehold sites – Crystal Tower and Seletar Garden – were offered for collective sale within days of two other freehold sites in Balestier being put on the market. Despite what some analysts may say, I think it is premature to write off the collective market.

Analysts claim that developers will be cautious about buying such sites as they have to build and sell all units within five years or pay a 10 per cent stamp duty under the ABSD if they fail to do so .

If recent developer sales numbers are anything to go by – an unofficial count showed between 1,700 and 1,800 housing units may have been sold last month as compared to only 670 in December – five years is a long time.

Also, the recent tender for a residential site in Jervois Road attracted 17 bidders, which continues to show that they are more interested developers than there are sites for sale at the moment.

Finally, if we need a reminder that there is still a lot of liquidity in the market, the recent vehicle Certificate of Entitlement (COE) tender showed premiums jumping across the board. The COE for cars 1,600cc and below climbed S$4,697 to S$52,809 while the COE for cars above 1,600cc surged S$6,001 to an eye-popping S$73,890.

For prospective home buyers eyeing a market decline, I suspect it is going to be one long wait.

By Colin Tan – head of research and consultancy at Chesterton Suntec International.