Private home sales have fallen in June. Some experts are blaming property developers; others are hurrying to tell you everything’s alright, and you should still buy because their CEO needs a new Mercedes. Hey, many of those experts also sell property; if I set fire to Tampines, they’d describe it as a great fire sale opportunity. In this article, I dig for the nuggets of truth in their reasoning:
State of the Market
According to Channel NewsAsia, private home sales fell in June, down 19.4% compared to May. This is a second consecutive decline: Sales in May also fell 32% compared to April.
The biggest dip comes from the RCR (Rest of Central Region), which saw a drop of 67.2%. The CCR (Core Central Region), however, saw a 4% rise in sales from May. This is mostly because of 1919@Sophia Road, which was a major launch in the CCR.
Before I dig into the reasons, I want to highlight one that really annoys me:
The School Holidays Excuse
Is the Ministry of Education aware of this? They should be in awe; apparently they can cool property sales without even trying.
Look, school holidays affect the property market the same way spaghetti affects airplane engines okay? If you try real hard you can imagine the connection, but it’d be mostly in your head. Yes, property agents may meet fewer prospects during the holidays; but serious buyers will hardly be deterred by this.
Besides, how could anyone calculate lost sales from buyers who didn’t turn up because they were on holiday? Forget this.
1. Developers Withholding Major Launches
We haven’t had many major launches these past months. It’s probably a strategic move on the part of property developers.
At present, the mood in the property market is turning from cautious to pessimistic. To shield themselves from falling prices, property developers might be creating artificial scarcity. Think about it: With fewer alternatives on the market, we’ll fight harder for the developments available. That translates to higher prices.
Note, for example, that property prices rose by 0.4% from April to June.
In addition, developers prefer to launch in an optimistic context. With reports of Singapore’s economy contracting, and the warning of oversupply, this has not been a good month to advertise property.
2. The Global Economy DOES Have an Effect
There are two kinds of property analysts who claim the global economy has no effect.
The first knows damn well it has an effect, but wants you to buy anyway. The second mistakes “recession resistant” for “recession proof”. Singapore’s property market is the former. Because we’re land scarce, the inherent value of our property is hard to dispute.
But that doesn’t affect, say, shrinking ex-pat packages.
As foreign companies cut expenses, they will gradually reduce the number of ex-pat workers. Even the ones who stay might be faced with smaller housing allowances. This dissuades prospective landlords, who then channel their capital into other investments.
Some people point out that CCR property sales went up, and that these are the favoured locations of ex-pats. I assert that a 4% rise, backed by a lack of major launches elsewhere, is a weak rally. It is caused by a smaller number of alternatives, not a healthy market for foreign investment.
3. Cost of Living Issues
Transport, food, tuition…the only cheap things in this country are the cheap shots we’ve started taking at our government. It’s not like they make it hard. For example:
Gee, maybe no one buys private property because you can buy a HDB flat on $1,000 a month.
See how easy they make it?
Anyway, Singaporeans are currently struggling with high inflation. Since HDB loans finance up to 90% of the house (as opposed to the bank’s 80%), HDB flats leave buyers with more liquidity. And liquidity is the most popular kind of reassurance in difficult times.
Note that I don’t say it’s a good kind of reassurance, just the most psychologically appealing.
Also, the high cost of living and poor global outlook are affecting confidence. Some Singaporeans worry about making home loan repayments for the next 30 years, even if they can technically afford private property.
That’s because HDB tries harder to avoid foreclosure. As such, the preference for HDB or private housing usually indicates our cost of living, and vice versa.
4. Expectations of Buyers
Everyone’s waiting for the property bubble to burst. It’s the most hoped-for event of the decade, next to Justin Beiber’s voice finally breaking.
According to a property agent I spoke to, who only wanted to be known as Gerald:
“Personally I think prices can still go up, because I feel there’s a lot of money in Asia at present. But some people are quite doubtful; they feel prices are already so high, that they cannot go any higher.
So at risk of being priced out of the market, these people are willing to play a waiting game. I believe that these expectations, along with frankly lacklustre property launches these past months, contribute to the fall in sales.”
My personal opinion is that those people are right. In fact, they might be creating a self-fulfilling prophecy: Everyone expects the bubble to burst, so they refrain from buying. With everyone refusing to buy, prices drop and the bubble really does burst.
We can only hope.
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