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Saturday, 29 August 2009

Bursting the bubble rumours

OVERNIGHT queues, balloting, midnight crowds – these dramatic scenes at the Optima condominium at Tanah Merah recently were precursors to the 270 apartments selling out in three days, and fuelling concerns that a property bubble may be brewing in Singapore.

Industry players have largely shrugged off such concerns – attributing the recent property effervescence to pent-up demand, peak public housing prices, excess liquidity and a growing population.

However, Today’s checks on the ground reveal a less simplistic picture – one with buyers signing on the dotted line without even viewing the showflats, buyers asking agents to sell a property right after purchase; and irrational decisions.

While these instances are, by and large, uncommon, their very existence is proof of unhealthy streaks in the market.

The buyers (speculators included), said agents, are split between those who already own HDB flats and those who are holding onto private property.

“They typically have fully paid up the mortgages on their HDB flats and … intend to move into the condominium and rent out their HDB flats,” said an ERA agent.

While the above seem to be the scenario for mass-market projects like the Optima and also the upcoming Trevista at Toa Payoh, smaller projects like the 127-unit Mezzo have seen “flippers” – those who buy a property, only to sell it quickly for a quick profit – walking right through its doors.

“Some buyers would tell me to release the apartments in the subsale market right after buying,” said an HSR agent.

Mr Patrick Liew, chief executive of HSR property group, told Today that unlike the property booms of the past, the speculators have a different profile this time round. He estimated that just about 5 per cent of buyers in projects his company is marketing are “flipping”.

“In the past, we saw major players coming in, market makers for example who have money and can buy many units,” said Mr Liew.

“Now we are not seeing that. People are coming in to buy one unit, they are your PMEB (professionals, managers, engineers, businessemen) type of characters, not the taxi driver who stopped work just to buy property like in 1996.”

A quick tour by Today of several show flats reveal that typical prospective buyers are your everyday mums and dads who are apartment-shopping with family members in tow.

Typically, they are not looking to buy and sell immediately, and are buying one more property with the aim of enhancing their investment portfolio.

“These people have holding power so we are not seeing a bubble at this point,” said Mr Donald Han, managing director of Cushman and Wakefield Singapore.

But these regular buyers will not hesitate to sell if the price is right – at anytime.

Take a businessmen in his 30s whom Today met at one of show flats. The man, who declined to be named, lives in an HDB flat in Queenstown but is a seasoned property player, albeit a small-time one.

He is currently shopping for his third private apartment – after making a “tidy profit” in his 2005 property purchase which he sold during the subsequent property boom.

Still, amid upbeat sentiments currently, mortgage consultant Dennis Ng warned of buyers who are biting off more than they can chew.

In fact, he has advised a few clients not to take up home loans and to sell off the property instead if it is clear that they would be stretching themselves too thin to pay off the loan.

Mr Ng added that many first-time investors who are HDB flat owners need to do their sums better and think of the downside risks before joining the current property exuberance.

“Some of the new condominiums do not offer good value for money and experienced investors will not touch them.

“If you’re looking for rental yields, comparable resale prices in the same area can be 10 to 20 per cent less and you can start leasing immediately,” Mr Ng said.

Source : Today – 26 Aug 2009

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