Bulls and bears

Bulls and bears.

Once again, we are back to this debate of whether the uptrend in the property market will continue.

Let's take a look at a traditional barometer of predicting market directions on this chart here.

Since 1999 (and perhaps even long before), the STI has always led the way in market exuberances or depressions. The PPI, on the other hand, will follow closely behind, mimicking the rises and falls of the STI, although with a substantial and consistent time lag of approximately 6 months.

Then a change occurred. The trends seemed to have reversed.

In present times, the STI has been rather stagnant since 2009Q3 at the 2475 – 2970 level, while the PPI seemed to have rebounded prematurely and continued to rise way ahead even though the STI has stopped rising.

Now, the PPI is almost back at 2007 levels (or already exceeded as some people believe), where the STI was sustained at high levels of 3465 – 3960 for a whole quarter.

Is there something we are missing here?

Both indexes appear to have reached a certain resistance level. For the STI, it seems there is difficulty breaching the 3000 mark. While for the PPI, it seems price increases have slowed significantly, with foreseeable difficulty in sustaining a level above the 2007 peak if the recovery is generally slow and no especially good news expected.

I guess its too early now to make a justified assessment. Like I said, April will be an interesting month – lets see if the major infrastructure works like the CCL and MBS can and will make a difference.

$10 million in 6 years

Wonder why people spend tens of million buying GCBs? Don't ask me - I don't own any.

But these transactions' histories just make you wonder why didn't you take that small gamble back in 2004 (I am not even talking about long-drawn historical prices in the 70s or 80s). The best part is, everyone agrees incomes have not changed much in 6 years. Well, if they haven't changed much, most people who can afford 4 million now should be able to afford 4 million 6 years ago right? The only problem would be the 20% downpayment.

If only we had taken that gamble...

Trasaction 1:

SWETTENHAM RD
15,149SQFT FREEHOLD
FEB 2010 $17,000,000
$1,122PSF RESALE

History:

SWETTENHAM RD
15,149SQFT FREEHOLD
AUG 2004 $4,640,000
$306PSF U/C

Transaction 2:

BINJAI PARK
34,586SQFT FREEHOLD
JAN 2010 $28,000,000
$810PSF RESALE

History:

BINJAI PARK
34,586SQFT FREEHOLD
DEC 2003 $9,000,000
$260PSF U/C

Well... just imagine... 4 million Singapore dollars and you are a GCB owner, barely 6 years ago. And.. in the event that you are bored of it just after 6 years - just flip it for a mere (read: awesome) 10 million profit.

Yeah right... I guess I'll just go on with my daydreaming...

China and Singapore

The first thing I read as I opened my email, "The Chinese property market looks likely to weaken because the government has indicated it wants prices to fall." - from The Edge Midweek.

What? Does that spell trouble for our property market? Will prices in Hong Kong and Singapore follow suit, or rather, will our governments follow suit?

Quite on the contrary, to me. I have mentioned this point on the Skyscraper's forum before - we actually need to thank the Chinese government on imposing measures preventing bubbles for our increased demand back home.

Most of the Chinese investors who want a piece of the property pie will either invest in China itself, or cross the border over to Macau and Hong Kong. No wonder you see Hong Kong property market sky-rocketing even as Hong Kongers themselves are priced out.

And China is no short of millionaires. So what happens to the rest (or the rest of the money for that matter). They come to Singapore. Buying properties to hedge against the threat of inflation is a very common reason, and the Chinese know all too well about that. With global inflation looming due to the massive stimulus put into the market last year, China's own inflation figures might just be set to shoot off the charts should economic (runaway)growth be uncontrolled.

Not only that. Singapore's prime property indexes are still quite a distance below Hong Kong's and China's, which makes us more attractive as an investment option. But not everyone will flock here like a herd of geese immediately - we need a spark, a big bang to increase Singapore's visibility, to set things into motion.

And the answer to that? The two mega Integrated Resorts at Sentosa and Marina Bay. Now, do we have all the elements for a bull run yet?

From homeowners to landowners

Land is the best and only way to go. It's official now.

All this time I was really toggling back and forth between a condo unit and a landed property. But as things are going, I am quite sure land is the way to go.

Previously, Singapore's growth model has always been powered by population growth. When locals stopped producing at optimum levels, foreigners came into play. Today, we have over a million foreigners in our midst - that's a lot for a country with a total population of only 5 million.

Here's the story - foreigners come and go. When they are here for a short period, they will need to rent. For locals, buying any second or third property will make good investments. When foreigners are here for a longer period or if they happen to be investors, they will buy up our local property. They cannot, however, qualify to buy land (with exceptions approved by SLA). This leads to condos and apartments always stealing the limelight when it comes to price appreciation in bull runs.

Now, the tables are turned.

The Government has turn down the tap for foreigners, coupled with the decrease in foreigners coming in over the past year or so, we can already see some effects. In some areas, landed home prices are now at its all time high. Yes, higher than the 1997 high some people thought will never be achieved.

And that's not the end of the story. Because you will say...its crazy..if landed prices are at a new high, why go in now?

If we follow the Economic Strategies Committee's recommendations, you will find an interesting topic called 'increasing efficiency of land use through exploration of subterranean land rights'. Through this particular recommendation and 38 others mentioned in the same report, we can see that the Government is now going back to basics - land, as a driver of increasing productivity and subsequently, growth in the long term.

This can only mean land in Singapore will become more valuable - not only because now there is an socio-political emphasis on it, but because bringing in something as 'far-fetched' as subterranean land rights will benefit landowners. Now, not only you own what you build above the land, you can own what is built beneath it. In the name of greater efficiency, your assets can be theoretically doubled.

As a disclaimer, I would like to emphasise on the need to invest on Freehold land, instead of just any land like those tagged with a 99-year lease. For with the Government starting to micromanage land uses, you know that they will only come up with shorter leases in the future, which makes Freehold land even more valuable.

Perhaps that sounds too airy fairy for you now.. but looking at how things are going, the term 'landowners' might very well takeover as the new pet word for journalists and writers alike in Singapore.

Uncertainty

While out shopping (I use this term casually) for landed properties these days, I noticed a similarity that makes me think twice on my bet on landed.

Most owner occupiers of the landed property are selling their home because they are now old. Their children have moved out and they all say the same thing, "We don't need such a big house". Of course, I can understand..the maintenance of the house, garden and the climbing of stairs, not to mention landed properties tend to be situated further from amenities as compared to HDBs flats and condos.

And so a quick check with Singapore Statistics website confirmed my fears. Indeed, we face a rapidly ageing population (everyone knows that already) that will see 1 in 5 in the elderly group by 2020. That's barely ten years from now! Only ONE property cycle.

Previously, we had optimism for offsetting factors - immigration and economic growth as two key drivers. But now, the Government sees a 5 to 5.5mil population as optimal, and we are already there as of last year's census of 4.99mil. Not much upside in terms of population in this case.

A rapidly ageing population also means economic growth will be hurt, especially badly for Singapore knowing precisely well human capital is our pivotal driver for growth, if not the only factor. This is further aggravated by breaks recently applied on incoming migrants. Now BOTH drivers for optimism have been badly dented.

If so, this property wave we are riding now could very well be the last time we see a new high. Following a serious property bubble, we could even fall into a deflationary spiral the one Japan had (is still) seen (seeing). And landed homes, once heralded as "something you can always trust to appreciate due to our land scarcity" might have seen its most glamorous days.

Okay, maybe I'm just frustrated of being priced out of the market now and being all bearish (for my own benefit). But unless our two new IRs, diversification and productivity drive succeed with flying colours in the near future, Singapore might have already seen her golden age.

Buy buy buy

Singaporeans are really cash rich. I'm kind of proud of that..but hey, it's disrupting my buying plans! Where will I live when I get married with kids? Where will my children live? Will we still be able to afford housing? Okay..now I sound like the typical ranting going on in ST Forum against HDB nowadays.

My mum was just saying the other day that Hong Kongers used to be obsessed with property shopping (that still holds true anyway), and it was only recently that Singaporeans caught on the flu. She then proceeded shake her head in helplessness (think TSK). Well, couldn't blame her...even her son caught on the fever.

But the exuberance in the current market? (info taken from Business Times)

The Estuary, from my sources, has sold all their units launched in the first phase. Mind you, that is 200 units sold within a day. Prime properties in CCR (core central region) are also still doing very well, with 45 units at Hiap Hoe’s Waterscape at Cavenagh and more than a dozen units over the weekend at L’VIV at Newton Road.

Most interestingly, just hours before the Government unveiled the two new measures to curb property speculation, buyers were tussling it out to grab units at The Laurels on Cairnhill Road which eventually sold more than 40. I wonder what reaction they had after they had gone home and settled down in front of their tv screen for the news.

On the landed side, things are far from 'grounded'. Good Class Bungalows and bungalows alike have been flying off the shelves (in this case, maybe classifieds section). And you can't use 'small quantum, ideal for investment' to justify as each of these properties are in the $10mil+ range.

Like what an agent said, "There’s still a lot of money; if you can’t put it in property, where else can you put it?"

Know your neighbours

Something I read in today's Straits Times gave me a chuckle.

"Mortgage debt may force Chans out of Everitt Road"

I'm sure everyone remembers this terribly embarrassing fracas years back. The remaining 4 neighbours involved who are still living there probably would not have welcomed better news than this.

But now another question arises. If the Chans attempt to sell their house, who will buy it? Apparently banks valued the 3 storey terrace at $1.5m, not too bad given today escalating land prices, but will anyone budge? Unless you find someone who was living under a rock or thinks neighbourly squabbles are nice to have, even rental income would be hard to achieve.

Now for the next question.. When the Chans sell their house, they must move somewhere else. (I'm assuming they own only one property) I really wonder where they will move to, and good luck to their new neighbours.

If you love and care for your neighbours, just remember to check this certain 'Chan' isn't the one signing on your option to purchase form.

The charm of Emerald Hill

Recently there has been a flurry of activity at an unlikely place.

Taken from the URA website:

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $8,500,000 2,937sqft Land 2,894psf Jan-10

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $5,000,000 1,567sqft Land 3,190psf Jan-10

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $4,900,000 1,598sqft Land 3,065psf Jan-10

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $7,000,000 1,992sqft Land 3,513psf Jan-10

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $4,000,000 1,552sqft Land 2,577psf Jun-09

LANDED HOUSING DEVELOPMENT EMERALD HILL ROAD Terrace House 1 $3,980,000 1,321sqft Land 3,013psf May-09

Not unlikely at all in this particular district, but a place where the small quantum of landed houses in a "small back lane" raises eyebrows when one sees so many sales in a month.

And mind you, this is not any small back lane, its directly behind Orchard Rd, sandwiched cosily between giant malls in front and the posh Cairnhill area behind. The curious me went immediately onto Google Street View to take a look at the houses there - and I fell in love with their charm instantly.

Go take a look for yourself...such a quaint, quiet place nestled within the busy city is indeed what you call a cul de sac.

Buying behaviours

There has always been something illogical about the buying behaviours of Singaporeans in the property market.

Investors always caution against judging a product by its face value, looking thoroughly instead at its intrinsic value. But how does this theory measure up in our property segment?

Besides being well known in recent times for having a speculative environment, home buyers in Singapore also tend to buy based to "prestige" instead of the true-to-bid-rent-theory "location".

Don't get me wrong. Of course residential sites in prime areas in close proximity still do well. But you may be surprised at the amount of "forgotten enclaves" within the city. Is this a sign that Singapore might be experiencing what urban surveyors call inner-city decline that used to only affect long-surviving cities?

Take for example Newton and Little India. Newton is known for all its glitzy condos, often selling at record prices in recent times (with Lincoln Suites and more recently, L'viv selling at more than $2000 psf). Little India, on the other hand...the location seems almost to be left in the past. Little India is actually much closer to the city.

Of course properties in Little India would command less than desired prices you might say...what if I tweak the scenario a bit to include Cambridge Rd or even Mackenzie Rd areas into the comparison? You will be shocked to find a freehold condo along these above mentioned roads selling at barely $550 psf, compared to the average of $1500 psf in Newton and Mount Sophia respectively, barely just a few hundred metres away.

Once again, this is to be expected, as "face" indeed plays an important aspect for a Singaporean household.

Hold, and then buy

In a surprise announcement by the Government, private property prices are set to be controlled once again (the last measure implemented in Sept last year).

This time, after repeated re-iteration of the highest-in-history government land sales being put available, they will be 'curbing speculation' by reducing the limit on all private home loans to 80% and imposing a Seller Stamp Duty.

Well, we are not so interested in these measures per se and whether they are applicable, but we are more interested to get the answer to an age-old question: Is it STILL time to buy?

Two ways to go about interpreting.

First, the government is sending a clear message that property prices must not be allowed to rise much quicker than the pace of the overall economic recovery. And if it still does, more measures are coming in fast. Prices are therefore still set to moderately.

Second, the government KNOWS prices will shoot through the roof in the near term, and are therefore doing all they can now to prevent a huge fallout subsequently, and meanwhile get some revenue through the additional seller's stamp duty (which might just be the case given our budget deficit last year and this year's projection).

Let's ask ourselves why prices will continue rising. After all, the property market has always been a follower of the stock market, and the latter is definitely not doing very well recently.

There is optimism in the economy. But for how long? Already news of bubbles due to burst are popping out in Hong Kong and China. With US still picking up its pieces and the PIIGS of Eurozone in debt, how long more can we continue to deceive ourselves that EVERYTHING is fine?

Sure, lets talk about a more immediate cheer in our national context. Growth forecasts were raised to up to 6.5% and we have two IRs opening, which is supposed to generate many jobs, attract many high rollers to further boost our property market.

Nevertheless, we are a very open economy and we depend a great deal on other world players in almost all our markets. Significant population growth, coupled by commendable economic growth since independence has been the recipe for our mindsets that "our house prices will always increase in the long term".

But will this continue to hold true now that the government is stepping its breaks on its migration policy and focussing on increasing productivity instead? We can always succeed and produce more but one household will only need (and I mean the strict definition of a need) ONE home. Where is all the demand going to come from for our "investment properties"?

RWS Sentosa has already opened, and MBS will open some time around the 2nd quarter. Taking all things into consideration, I predict a slight dip in property prices and volume in March before rebounding when interest in the market returns when MBS opens.

In conclusion. HOLD now, BUY in March. After that, good luck.

Marina Bay, the new Orchard?

Are properties in our CBD area undervalued?

As far as I know, there are only a handful of condos that made it into this distinction. Namely One Shenton, The Sail, Lumiere, The Clift, Icon, MBR, The Arris, Altez (the new cousin) and probably a few more low profile ones.

Excluding The Sail and MBR which were prematurely infected with the Marina Bay Fever, the rest are still struggling to meet the $1800psf to $2000psf mark, with new launch Altez taking the lead. In 2007, the highest psf reached in this area was barely in the $3000+ range.

If you compare with prime Orchard properties however, they are still far below their current average of $2500+psf and 2007 peak of $5600psf! The honour of course goes to the centrepiece Orchard Residences, which sits right on top of Ion Orchard.

Singapore falls far behind other international cities in terms of development of private homes in the CBD area, but then again its no surprise. Just take walk at night say maybe 10pm in the CBD and in Orchard. You will get your answer on why Orchard is still a better dwelling location.

But now that the Marina Bay Sands in opening in April and the Gardens by the Bay are slowly taking shape, Marina Bay may just succeed in becoming another Orchard, or better. So maybe everyone should buy CBD properties now before prices shoot through the roof (that's probably what the lady in her 30s who bought 4 units in Altez thought)? Either way, 2010 will be an exciting year for us, I'm sure.

Outrageous Ang Mo Kio

Honestly, I cannot comprehend how such atrocity can continue well into present day.

From URA Website:

CENTRO RESIDENCES ANG MO KIO AVENUE 8 Condominium 1 $1,118,800 904sqft Strata 1,237psf Jan-10

CENTRO RESIDENCES ANG MO KIO AVENUE 8 Condominium 1 $927,730 807sqft Strata 1,149psf Jan-10

Everything about this development just screams outrage! Never before has any developer had the cheek to launch an OCR (suburban) "mass market condo" so high. We all know and there is no need to mention who the developer is.

Bishan 8 in bishan (of course), launched in 1997, was the last condo to have seen launch prices of above $1000psf. (Once again, no prizes for guessing who the developer is) And many first owners are still sitting on paper loss today.

This project would easily win the most outrageous project launched in 2009. Either the 83 buyers (so far) know something we don't, or like what I always say, in a bull market, people actually believe in bull*.