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Buyers are back in droves

Developers and their marketing agents for recent property launches must have heaved a sigh of relief as investors returned in droves to the private housing market.

Developers and their marketing agents for recent property launches must have heaved a sigh of relief as investors returned in droves to the private housing market.

Dogged by weak sentiment in the previous three months, many sellers have been losing sleep trying to face up to a market that they believe has reached that dreaded turning point — with prices going downhill henceforth. If feedback to the developers’ latest sentiment survey is accurate, many believe the Total Debt Servicing Ratio (TDSR) framework introduced in June was one “cooling” measure too many.

A lot of thought and deliberation must have gone into setting the pricing of projects on launch day. We witnessed a huge publicity effort to convince buyers that prices had been slashed to levels to sell.

What irony. We now know they need not have worried as investors swamped the showflats, and some developers may be kicking themselves for not being brave enough to go for slightly higher prices. The Inflora in Pasir Ris, Alex Residences in Redhill and Duo Residences in Bugis did exceptionally well, with more cheques handed in than units available.

The Inflora sold like hot cakes, with at least 250 units, or nearly two-thirds of all 396 units available, reportedly sold on launch day. At the preview of Alex Residences, buyers snapped up about 150 units in an afternoon, and the developer had to release 50 units more than originally intended to meet demand. At Duo Residences, around 468 units had been sold as of last Friday, out of 540 units released.

Many have been surprised by the success of these launches and are now predicting a strong rebound in sales numbers this month. Has the TDSR lost its bite? Nothing has changed: The curbs have not been lightened.

Earlier this month, the National University of Singapore announced a S$5 million real estate professorship, hoping to improve the quality of real estate education and research. They hope to attract academics who can conduct research in real estate economics and finance as well as teach students to handle the changing industry.

Is this an indictment of how poorly our current real estate experts are doing in providing insights to current market conditions? A perfect storm for the property market was predicted for 2013/2014. There is still time for it to happen, but some analysts are now saying it will likely be in 2015/2016 instead.

In any case, some analysts still insist the recent loan curbs are slowly working and that the success of recent market launches is due to clever marketing and price discounts. I agree — since when did a developer merely have to announce a launch date and sell without any effort?

For argument’s sake, let us assume that the market is turning, as many still believe. Some developers are now getting worried about the land supply and have been voicing their concerns.

They hint that the authorities should reduce the number of sites when they announce the Government Land Sales programme for the next half-year. They foresee a market that will be grossly oversupplied, if not now, then in the near future.

Should land supply be reduced? If you examine the recent tenders, land prices have continued to go up. Interest is still strong, judging from the number of participants — more so if you separate the individual developers in the many joint bids.

Prices can only continue to go up if land supply is reduced. The authorities have already experimented with closing the tenders for sites at the same time but without much success in reining in response. Of course, one could argue that prices would have been higher if not for this.

The fact is that many developers have been doing well in recent years and they need to do something with these huge profits. Some developers have ventured overseas but this comes with higher risks. There is no market like home and eventually they return.

The authorities should perhaps offer more non-residential sites if the biggest concern is the oversupply of housing. Alternatively, they could offer more retirement housing sites: Oversupply is not necessarily bad, given our ageing population.

The point is that developers are in the business of developing and they need projects to justify their existence. If an oversupply is inevitable, let us have it in areas that will be more beneficial to us.

Colin Tan is Director of Research and Consultancy at Suntec Real Estate Consultants.

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