Home prices have hit floor?

[-------]

Simon says: Home prices have hit floor

Head of property developer SC Global still bullish onthe local real estate market

CONRAD RAJ

JUDGING from recent transactions, property prices appear to have hit or are near the floor, according to Mr Simon Cheong, the president of the Real Estate Developers’ Association of Singapore (Redas).

As evidence, Mr Cheong, the head of high-end property developer SC Global, points to recent transactions of luxury apartments at Nassim Park and Goodwood Residences, which went for nearly $3,000 psf and $2,800 psf respectively.

“The high-end is the leading indicator. Why? Now you see the sophisticated investor coming in — people who spend $10 million, $20 million, $30 million (on a property) — these guys are no fools you know,” he says noting that during the 1997 financial crisis luxury flats like those at Ardmore Park were selling for just $1,000 psf.

Even mid-class units at developments like those at Dakota, Clover by the Park and Livia are enjoying brisk sales.

“Nett nett, property is still a great performer in the mid to long term. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received,” Mr Cheong says.

The property market is driven very much by sentiment, and not just by the laws of supply and demand — the “feel good” factor, he says.

According to Mr Cheong developers’ prices have fallen by 30 per cent in all sectors of the market since their peak last year, but are still double those before the sub-prime problem kicked in last August.

“The current situation is timely, as since 2005 the property market has been climbing relentlessly for eight straight quarters according to URA (Urban Redevelopment Authority) figures. So, it’s time it took a breather.

“We developers were getting concerned that it was climbing so fast. So the sub-prime crisis, in a way hit at the right time and took some of the steam off the market. In a way it came as a relief to developers who were afraid that the steep climb in prices could tempt the authorities to take measures to curb speculation,”Mr Cheong told Today.

He also pointed out that it was not in the interest of developers to see prices going up too fast: “There is no reason why developers would like to see an exuberant market and see the bubble burst.”

But he claims that his positive outlook for the property market is also driven by fundamentals as interest rates are at present so low and the inflation rate so high it does not make sense to keep your money in the bank.

“What do I do if I have a lot of money in my bank account earning 0.6-per-cent interest while inflation is 6 per cent or more, and my money gets smaller and smaller by the day?” he asked.

One answer is to put your money in property as in the long run it is a better hedge against inflation than equities.

Furthermore, property rentals currently provide yields of 2 to 4 per cent, again better than putting your money in the bank.

And there is plenty of money around for when Standard Chartered Bank, earlier this month offered a promotional deposit rate of 2.28 per cent, it was so swamped that it had to withdraw the offer in just two days.

Mr Cheong expects interest rates to remain low over the next two years or so.

The supply of properties is also not as high as many people think. He pointed to a recent Citibank report which said that the bank sees no oversupply of homes over the next two years.

The report estimated that only 60 per cent of the 30,000 units forecast by the URA, will be completed during this period as by end March there were 6,000 en bloc flats that had yet to be demolished.

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

High construction costs have also resulted in many projects being delayed. With the many building projects going on — both by the private (including the integrated resort projects) and public sectors — and high material costs caused by worldwide demand, constructions costs will remain for some years, Mr Cheong said.

He pointed out at the same time that construction costs here are currently higher than those of Dubai or Hong Kong.

“It takes three months to tear a building down but three years to put them up. Once you have taken it down, supply is taken off immediately but to put that supply back it will take three years,” he said.

Construction costs are now double what they were a year ago, with high end building costs between $600 and 800 psf and at the low end from $300 to $350 psf.

Sometimes Singaporeans also do not realise that market here being relatively small, it would take less than 1 per cent of the available global funds to see the market run up. So, it is not unreasonable to expect a strong turnaround when the sentiment improves, Mr Cheong said.:

He added that Singapore has also become a global city and price comparisons of property were now benchmarked against cities like London, Hong Kong, Shanghai and New York rather than against historical prices here.

“And contrary to market perception, funding is not an issue, There is no shortage of funding for end purchasers as evidenced by various bank packages (for mortgage loans),” he noted.

“My advice to potential buyers is that if you do not have high exposure to the property market, it is an opportune time to consider property”, he said.
     

[Be patient]

Prices will fall somore.

[Relax again]

Prices will fall somore.

Take care of your health. Make sure you are alive to see your dream condo.

[Remarkable Recovery]

Mr Simon views are similar to mine.

As the story goes ->

The market has staged a remarkable recovery.

It is believe that the market has found its bottom in April and May, the strong take up of recent launches in June goes to shows that demand is very strong and buyers will snap up units if the price is right.

We believe going into the 2nd half, price will stablised and volumne will improve.

HDB prices continue to be strong, and is expected to rise in the coming quarters. Mass market property will be the darling for the second half as developer are likely to focus on this segment comprising largely of HDB upgraders and PR in search of quality housing.

Those waiting on the sidelines may be wise to pick up your dream property if a good project comes along and the price is right. With high inflation eroding away pile of cash in the bank and rise of ugly bear in the stock market, it maybe the best choice one could make now.

Gov.

[Bear's logic]

Mr Simon views are similar to mine.

As the story goes ->

The market has staged a remarkable recovery.

It is believe that the market has found its bottom in April and May, the strong take up of recent launches in June goes to shows that demand is very strong and buyers will snap up units if the price is right.

We believe going into the 2nd half, price will stablised and volumne will improve.

HDB prices continue to be strong, and is expected to rise in the coming quarters. Mass market property will be the darling for the second half as developer are likely to focus on this segment comprising largely of HDB upgraders and PR in search of quality housing.

Those waiting on the sidelines may be wise to pick up your dream property if a good project comes along and the price is right. With high inflation eroding away pile of cash in the bank and rise of ugly bear in the stock market, it maybe the best choice one could make now.

Gov.

According to bears , during  inflationary times, prices will increase for everything EXCEPT property.They rather let their money rot in the bank than in property. In fact property prices should decline even when everything else is getting more expensive.

Soon you will find everybody in Singapore can afford a Dist 10 condo since it will be so cheap relative to other things.

[C Doyle]

----- = Relax again = Remarkable recovery = Bear's logic

(one and the same person  ) are you? 

[No no]

----- = Relax again = Remarkable recovery = Bear's logic

(one and the same person  ) are you? 

No we are not one and the same person.

[stock punter]

ok, here are my thoughts...


“The high-end is the leading indicator. Why? Now you see the sophisticated investor coming in — people who spend $10 million, $20 million, $30 million (on a property) — these guys are no fools you know,”
these 'no-fools' are also clearly not stock investors, or else they would have picked up the great bargain that SG Global obviously is, down 66% from the highs 12 months ago



he says noting that during the 1997 financial crisis luxury flats like those at Ardmore Park were selling for just $1,000 psf.
thanks for the tip! now I know what price to wait for


“Nett nett, property is still a great performer in the mid to long term. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received,” Mr Cheong says.
eh, why is property going from 1000psf to 2800-3000psf better than stock market going from 800 to 2900? rental received? well how about dividend yield? and not to mention all the outgoings associated with physical property



The property market is driven very much by sentiment, and not just by the laws of supply and demand — the “feel good” factor, he says.
ok, with this point I totally agree.  What's everyone sentiment right now regarding the economy?


According to Mr Cheong developers’ prices have fallen by 30 per cent in all sectors of the market since their peak last year, but are still double those before the sub-prime problem kicked in last August.
ok, trying to do the maths here.  Is he actually saying that something worth 1,000 psf (say) in July last year, before subprime, shot up to 2,850 at the peak a few months later, and has since decline 30% to now be worth 2,000?


“We developers were getting concerned that it was climbing so fast. So the sub-prime crisis, in a way hit at the right time and took some of the steam off the market. In a way it came as a relief to developers who were afraid that the steep climb in prices could tempt the authorities to take measures to curb speculation,”Mr Cheong told Today.
He also pointed out that it was not in the interest of developers to see prices going up too fast: “There is no reason why developers would like to see an exuberant market and see the bubble burst.”
Oh, I see... he is "relieved" property prices have come off, thereby reducing the worth of his firm by 66% in 12 months.  What a charitable chap.  He is clearly delighted all us common folks now have the chance to join in his success story


One answer is to put your money in property as in the long run it is a better hedge against inflation than equities.
is there actually any empirical evidence of this oft-repeated clain?


Mr Cheong expects interest rates to remain low over the next two years or so.
So he is concerned about inflation, but he espects rates to stay low?

had a few more comments, but these would do for now

[cmdsea]

president of the Real Estate Developers’ Association of Singapore (Redas)..... What on earth were you expecting him to say.! Of course he is going to do his best to try and talk up the market... 

[hear hear]

quite right, cmdsea, my sentiments exactly when I read the article this morning.  But turn back a page and you'll see a completely different analysis from Head of Research at OCBC Investment:

"Going forward we expect to see further weakness in residential property prices.  Sentiment is likely to remain cautious against a backdrop of a weaker economic outlook, tighter credit market and rising inflation....."

I think that's a much more realistic view than someone who has a vested interest in talking the market up.
 

[Of course]

president of the Real Estate Developers’ Association of Singapore (Redas)..... What on earth were you expecting him to say.! Of course he is going to do his best to try and talk up the market... 

You have sold/enbloc your property and is renting and waiting for the price to fall before buying and is in the sideliner group.

[Too Precious]

Simon Cheong was also the guy who once commented that he would doubt the sincerity of a buyer who attempted to negotiate the price for one of his SC Global apartments. He also added that every apartment unit was very precious to him, and that every unit sold was one fewer to be sold (presumably later and at a higher price?)...

I wouldn't take the words of someone who speaks in a convoluted and circular logic that makes no sense...In any case, he is an eternal optimist where the local property market is concerned...

[leverage]

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

this is an interesting statement. not sure what's the basis though.

otherwise, am equally bemused at his thought process...

[Simon says]

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

this is an interesting statement. not sure what's the basis though.

otherwise, am equally bemused at his thought process...

His optimism for the property market as a developer might be questionable but do not ever doubt his thought process - look at his track record on how fast he made his money. You need brains for that which none of us wasting our time in this forum would be able to match - including you.

[lols]

Today's papers said Indon is setting up committee to look for US$30 bil of "missing" oil revenue. I wonder where it went.