Thursday, August 13, 2009

Singapore property market booms despite recession

As reported by AFP today:

AFP - Wednesday, August 12SINGAPORE (AFP) - - Despite Singapore's worst economic slump since independence, the residential property sector is in the midst of a new boom reminiscent of 2007, when the city-state was known as the world's hottest real estate market.

Greed and its twin brother fear are back in play as punters stake out condo launches days before sales open, with some offering blank cheques to pre-book flats, prompting the government to hint it may have to cool things down.

"Some of the practices and habits that you saw in the last property boom are beginning to come back, so I think we'll have to be careful," said Minister for National Development Mah Bow Tan, whose portfolio includes housing.

"A little bit of speculation is inevitable in every market, but when it becomes excessive, then it is something that we should try to avoid," he said.

The minister's words of caution fell on deaf ears.

A 297-unit condo called Optima in the extreme east -- well outside prime districts -- sold out in within three days in early August after Mah's warning, fetching as much as two million Singapore dollars (1.38 million US) a unit.

The developer had to issue ballots "to address the needs of the genuine buyers" and disperse the huge crowd that turned up for the launch of the project, which will only be ready for occupancy in 2014, a spokesman said.

Within days, some units were already being advertised for resale in the secondary market.

An AFP reporter who recently walked into the sales office of another high-rise condo being built close to the Orchard Road shopping belt was treated like royalty by agents expecting to close deals within days, if not hours.

Bank officers were ready to process loans on the spot.

"Buy before prices go up further," an agent whispered in his ear, gesturing to a "sky garden" bisecting the scale model of a glass-clad, 45-storey tower.

Singapore's economic output is officially forecast to shrink by four to six percent this year -- less severe than earlier estimates, but still its worst economic performance on record -- and office rents are still soft, reflecting weak business activity.

"It is too early to celebrate," Prime Minister Lee Hsien Loong warned over the weekend as he spelled out the country's economic prospects. "The outlook remains clouded."

The property frenzy began in middle-class condo projects due to pent-up demand from families upgrading from public to private housing but scared off by the 2007 price spiral.

Their enthusiasm quickly spilled over to more exclusive developments.

Prices of luxury condos -- the segment worst hit by the recession -- are now inching toward peak levels achieved around mid-2007, according to an analysis by business weekly The Edge.

Foreign investors, including Asians looking for a secure place to park their money, are also back in the Singapore market.

Singaporeans enjoy one of the world's highest savings and home ownership rates, but most live in relatively spartan government-built flats, making owning condos an obsessive goal for families.

A pension system forces them to save more than a third of their monthly income, and the accumulated funds can be tapped before retirement to buy property, creating a massive pool of financing ready to be used when market conditions are good for buyers.

Chua Chor Hoon, senior director and head of Southeast Asia research at property advisers DTZ Debenham Tie Leung, said various factors combined to spur renewed buying in Singapore properties.

Signs of economic recovery, the stock market rally, the imminent completion of massive casino resorts, low interest rates and lack of confidence in complex financial products encouraged property buyers.

Asked if the government will have to intervene to stop a bubble from forming, she said: "There's froth but no excessive speculation."

"The government is likely to increase the supply of housing units through the sale of government land and monitor the situation first."

Chua Yang Liang, head of Southeast Asia research at Jones Lang LaSalle, said demand is largely driven by buyers upgrading from government housing due to strong wealth creation in recent years, and the shrinking gap in cost between public and private housing.

"However, unless we begin to record positive growth in the larger global and domestic economies, the recent spike in demand and prices is short-lived and could cause asset driven inflation in the longer term, especially if wage increases do not keep pace," Chua added.

"In our opinion, there isn't enough compelling reason for the state to want to interfere into the market phenomenon just as yet, unless it affects the overall affordability for the masses and causes asset-driven inflation in the economy," Chua said.


paul said...

hi, i have never heard you mention Mont kiara property, what do you think about that area? I am a foreigner, and will be relocated to Malaysia in couple months. there are many realtors recommend that area to me as well as klcc, but i don't really like city life, so i am still considering other areas including Mont kiara. where do you think i should choose if i want to buy/invest one in malaysia. there are only three member in my family, myself, wife and a 1 year old daughter. thank you for your opinion,

sinleong said...

it's just my personal experience that i do not like mont kiara. i feel it is too congested, too high density and don't like the fact that the place is sorrounded by highways. it is literally encircled by highways - the NKVE, SPRINT and Penchala Link. but it is still a very popular place for expats, partly because of the drinking places in hartamas and the international school. just like Klcc, investors appear to have mixed results. It depends very much on which condo, what view and location of condo. You really need to do a lot of research. I have not bothered. Other places you may consider are Bangsar (Sri Penaga) and Federal Hill.

Anonymous said...

Re: Paul's comment.

Viewpoint from an expat family here. We have just bought a pad in MK, so, you can say we have a vested interest in the area albeit for own-stay purpose. However, this has not always been the case. We have been living much closer to the city area for a good many years and have never before seriously looked at MK as an option. Things changed in the last couple of years with our wee one happily entrenched in one of the international schools in the area. Being in and out of the school all the time for various activies opened up our eyes on the advantages and possible attractions of living there.

On the part of the Missus, it is a huge plus to be within walking distance to the school as she would be spending a large part of her time ferrying Junior to and fro. Yes, there are school buses which service the many residential areas in KUL. But time-wise, it can be a drag, especially on a young child. We miss the opportunity of walking just round the block to school, just like in the UK.

We feel that MK has yet to reach its full potential as it has yet to be fully developed. Ameneties are sufficient for a decent family life. It provides a nice little community on the fringe of the city.

To each his own, I guess ....

William said...

hi, sinleong

i am moving to malaysia from Canada in three months too. the realtor in Malaysia has been recommending Hampshire residence near klcc? i just wondering have you seen this project yet? and what's your opinion of this residential project? thks.

sinleong said...

I have never been to Hampshire Residence. It is very near, within walking distance to KLCC but unless you work there, I am not sure if you would like to walk to KLCC everyday. But I guess if you are working around the city center, Hampshire Residence would put you at a close distance.

Personally, I do not like the sorrounding. There are limited eating places unless you can afford the premium and eat in KLCC everyday. There are also a few more projects coming up in the area which means construction debris, dust and noise for at least another 3 years. I may be vindicated since the 15th estate agent contacted me to offer units in Hampshire at offer type of bargain, I realized there seems to be many people desperately trying to sell.

This also means, you will be able to negotiate a good rent and maybe get the owner to throw in extra items for the tenancy.

christin said...

this is quite interesting reading above comments. I am an expat. too, however, still looking for a better place to settle with my family in KL. unfortunately, i have no idea, because every realtor seems to have different opinion on almost every area. we are quite confuse indeed. so, sinleong, you as an local malaysian and having so many years of realty investment experience, can u suggest us (expat.)where exactly in Kl area that suitable for us to stay, for example, the area with less traffic congestion, with eating and shopping place around (not the premium one like KlCC)? a place that can balance life style and everything, if housing price is not an issue. Really appreciate your comment, by reading your blog really help us to make a better decision.

sinleong said...

there is no suitable-place-to-stay-blueprint that applies across every expat in malaysia. it all depends on your work location, choice of entertainment, kids, schools etc etc... there is also no traffic congestion free area in KL, unless you walk to work. for example, i walk to work from my condo in bukit ceylon. it's a 10minute walk and i get a lot of pleasure watching people get stuck in their cars during rush hour. but of course, i sacrificed in terms of space. for what i paid, i could have bought something bigger in the suburbs. many expats also make a decision based on their kids' schools. international schools in KL are kinda spread out e.g. AISM is in the south, ISKL in ampang, garden is in mont kiara etc. perhaps if you can give me more details, i can narrow down some choices for you

paul said...

thank you for your comment, sinleong and "the Anonymous". i am checking out damansara hight this week with realtor. if you have opinion on the damansara, pls let us know. i think i truse you more than the realtor...haha. thank you all.

p.s maybe you should create a forum in your blog, so everyone can share their opinion...just a thought

christin said...

ok, thank you sinleong. Here's more info you need.
1.we are retired. don't have any kids, therefore, no school problem.
2.we are early 40 yrs old, and love Malaysia..well...almost everything, foods, people, culture..etc. we are here through mm2h program. to stay in KL area,city life is good, good area with easy access to everywhere. if can't avoid traffic, that's ok.
4. no working, retired.

so, where do you think we should live?


sinleong said...

hi Paul,
Damansara Heights is a rather matured neighbourhood. You will also find many mature neighbours there as well. It was originally developed by SPPK which is the developer for government housing. So, many of the residents there who were government servants moved up the rank until their retirement in a very senior position. No doubt, being an exclusive area, Damansara Heights also has a sizeable expat community. Most of the properties there are quite aged and unless they are renovated, it will not be so attractive. Lately, crime has been a big problem in this area and houses have been a good target since this is not a gated and secured neighbourhood. Many residents have moved out to other newer exclusive areas such as Sierramas, Desa Park City and pockets of gated communities within Damansara, Seputeh and Bangsar areas. These new areas are gated communities which offer 24x7 security which I think if what you ought to be looking for. Damansara Heights also have a few condos; however, being a mainly bungalow community Damansara Heights is very low density compared to other condo communities like Mont Kiara and Bangsar.

sinleong said...

Christin, early 40s and you are retired??!! I envy you! I would imagine you will have no issues with budget then. There are in fact many choices for you. But being retiress... although very young, I do not recommend you to be in KL. Unless you have other reasons to be in KL such as to manage a business, attend your favourite sports club etc, why don't you consider Penang? In Penang, there are many beautiful condos and landed properties along the beach at Gurney drive, Tanjung Tokong and Tanjung Bungah. Penang offers you the hills, beach, great food, quaint architecture and a very relaxed lifestyle although it is Malaysia 2nd most bustling economic city. So you are not too far from civilization although you live in a paradise resort. Haha...I hope I am not overselling Penang. If you like KL and play golf, why don't you consider those gated communities built within a golf course like Saujana and The Mines Resort.

christin said...

thks sinleong, Penang is too far from KL eventhough it is a beautiful city. I am a frequent flyer around asia cities, therefore, i prefer to live near the kl city. Oh, and i love the night view from KL high rise building anyway.
ok, i want to ask you this. there is a realtor has been pushing me on buying Pavilion residence, i went there twice and i have to admit this is truly a beautiful building. But, i need your opinions on this project, what do you think? location? convenient? traffic ( i know is going to be really bad)? food around?
oh, this is leasehold building, is this a really bad thing know?

oh, by the way, do you speak mandarin (chinese)?


sinleong said...

I've always avoided leasehold buildings because of all the hassles of selling it later. There are so many beautiful freehold properties so why settle for leasehold.
If I have the kind of money, I would opt for either Park Seven or Binjai on the Park (NOT Binjai Residency). Many luxurious properties in KLCC area are badly occupied due to the over-supply. One good way to find out where everyone flock to is to take a walk at around 8pm at the KLCC park. Look up at all the condos around there and you will see that both these condos I mentioned have 90% of their lights switched on - means occupied.
You do not want to end up in a place where it's badly occupied as you may face maintenance problems and there are also reasons why the take up is not so good.
I'll try to avoid condos that share the same building with a shopping mall. If you want to be close to shopping and greenery, traffic not so bad... go for these 2. They are across the park from Suria KLCC. I hope your retirement fund is sufficient....

paul said...

Have been really busy looking for house these two weeks. It looks like the market is getting hot again in KL area. the show room are really busy. I am very interested in Dua residence, what do you think sinleong?

sinleong said...

dua residency... u either love it or you hate it. i suggest you go see for yourself. if you have to buy one, avoid units facing jalan tun razak.

paul said...

sinleong, thank you. i will pay attention not to pick a unit facing that street. i have another question for you. can you tell us (expat.) how to negotiate with the price they (owner or realtor) offer? at this time of the market, how much % should we counter back 10%? or even more? i have never bought house here, therefore, your negotiation experience might help me and my friends alot, thank you. (for example, dua residence, the list price per sqft is $850)

sinleong said...

the lowest i've seen in dua residency is RM720psf in these last few months. but these are large units and maybe they r facing the busy and noisy main road. negotiation is a secret, can't post it here. many realtors read this blog too ;) but if you are really keen, we can go for a coffee and discuss.

paul said...

thks, man. i would love to. can you e-mail me :