The most bullish of all bull runs?

27 April 2012
Colin Tan

Judging from the recent spate of positive market news, it appears that there is no better time to be involved in property than the present.

A report on Wednesday highlighted the sharp rebound in resale transactions of completed private homes last month, confirming that the secondary market had indeed recovered to levels before the additional buyer's stamp duty (ABSD) was imposed in December.

That segment of the market had been in "deep freeze" since the introduction of the ABSD but thawed quite suddenly. Indeed, it has been a lot harder to make an appointment with your real estate agent in the past few weeks, than say, in the early part of the year.

Excluding the caveats filed for executive condominiums and en bloc sales, there were 1,142 resale deals for private homes last month. This is more than twice the 565 caveats for February and more than three times January's volume of 314 transactions. Last month's number also exceeds December's volume of 776 and November's 981.

Only a day earlier, it was reported that rentals for homes in the private market had risen yet again for February. Overall, the message was that, with the exception of small pockets of weak rents in some locations, the leasing market has been pretty resilient - even amid news of expatriates returning home in numbers.

These expats are those who have not been successful in renewing their employment or work passes.
But if you look at the data, there had never been so many renter households in Singapore before. For the whole of last year, there were 45,062 private leasing contracts lodged with the Inland Revenue Authority of Singapore.

Meanwhile, according to the Housing and Development Board's website, the number of subletting approvals for last year totalled 26,130. Ostensibly, these numbers are keeping rents for both private and public apartments fairly high, if not higher.

The leasing market has been a puzzle: How do we square the returning expat numbers with the rising number of rental contracts? The answer must be that more locals are renting.

Who are these locals? Many are beneficiaries of en bloc sales. And the tenders for collective sales - discounted by many to fall sharply this year - are coming thick and fast.

I am amazed at the speed at which they are hitting the market, and some of these developments are not very old. Their impact on the market cannot be denied, especially their roles in the robust sales of new properties and in the high rents for both private homes and public flats.

Then, there are the robust sales for new units at developers' launches - mostly shoebox units - starting from Watertown in February and sustaining the momentum right up to Sky Habitat and Katong Regency in recent weeks.

The most common comment from property analysts this week is that they are not ruling out another round of cooling measures. I think by now, almost everybody knows this without any need for reminders. What matters more is the kind of measures that will be introduced.

We have already seen off five rounds of cooling measures but we do not seem to have got much further from square one. If the measures do not address the issue of low borrowing costs directly, I would not rule out just another round but a few more.

Finally, the widespread optimism has even begun to permeate the moribund high-end market segment.

Projects located in the prime central areas as well as those on the fringe are being re-launched with discounts, rental guarantees, luxury fittings and designer interior decor. And if the promotion packages catches on, who knows, the buying fervour may just spread to the rest of the high-end market.

The thing with market launches is that they help provide more recent sale benchmarks against which buyers and sellers in the secondary or resale market can rely on to conclude their transactions. Without such a benchmark, there is usually a stand-off between my offer and yours.

As it is, some agents are already spreading the word that the suburban market is over-bought and over-supplied and that it may be time to re-enter the prime segment.The prices on a per square foot basis has certainly narrowed between prime and fringe versus suburban.

Yes, it does seem a lot more convincing this time around. Is this finally the year of the high-end market?

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