Fm TODAY, 19 Feb 2004
The property market and the waiting game
The time is ripe for a turnaround, but who will blink first?
Derrick A Paulo
derrick@newstoday.com.sg
Like two poker players watching each other for a tell-tale twitch, homebuyers and property developers are waiting to see who will blink first.
Analysts say the conditions are ripe for an imminent improvement in the property market, but everyone's waiting for a sign of a turnaround.
The feared Sars resurgence has not taken place. The impact of the Iraq war is being felt only in Washington and a global economic recovery seems on track.
"The ingredients are in place, but what seems to be missing is somebody who is willing to make the first move," said Mr Tay Kah Poh, executive director of property consultancy Knight Frank.
Homebuyers, having seen prices on a steady slide for almost three years, are still sitting on the sidelines and watching for evidence that the bottom has been reached.
Developers, meanwhile, are waiting for signs that buyers are returning to the market. "There are not that many interesting projects being launched. Many are projects which are being relaunched. It's all about cautiousness," said Ms Tang Wei Leng, associate director at DTZ Debenham Tie Leung.
"If developers price one project wrongly, it will affect all the other projects."
While there have been some property launches in recent months, these have been in the mid-market or upper-market range, where the demand is considerably smaller.
At a micro-level, things are picking up, said CKS Property Consultants' director for residential agency, Mr Charles Ng. "If you look at the newspapers, companies are beginning to hire again. If you look at car registrations, the number is going up. The stock market has gone up and people may soon be profit-taking and parking their money somewhere else, like property," he said.
The current low interest rate environment is conducive for buying homes. And, after a general decline of several years, the HDB market has picked up, with the resale prices of HDB flats on the rise.
Developers, however, are in no hurry to get their projects off the drawing board. Most have already absorbed the hits from the last three years and are not dependent on generating liquidity from sales to stay afloat or satisfy shareholders.
"There is enough supply now and in the pipeline. There are about 18,000 unsold units and units yet to be launched," pointed out Chesterton International's associate director for research and consultancy, Mr Nicholas Mak.
But homebuyers need to see that the economic recovery can be sustained and job security is still a concern, said Mr Mak. "That bullish factor is not there anymore," said DTZ's Ms Tang.
Now, there is a new wild card in the deck: Flexi-wages. The uncertainty over just what the push for wage reform could mean will dampen the demand for property, said Ms Tang and Mr Mak.
Singaporeans have wised up and will be doing their sums very carefully. "The message not to over-invest seems to be sinking in," said Mr Tay.
All this waiting means that pent-up demand is bubbling under the surface. Last year, only 5,200 residential units were sold compared to the annual average of 6,000 to 7,000 units.
Jones Lang LaSalle's head of research, Ms Teresa Khoo, expects a better take-up rate this year. Some observers see prices rising around 5 percent this year as demand increases, but the significant prices increases will only come when developers see a sustainable increase in buying activity.
With 17 projects with a total of 3,100 housing units due to come onto the market in the next six months, there is a good chance, say analysts, that one or two could provide the spark that seems to be needed to initiate a recovery.
"Let's see who will blink first," said Mr Ng with a laugh.