Property Market slowing down?

The political instability in the past two months partially affected the market. The number of new build units in Bangkok dropped but the market in the outskirt areas of the capital and upcountry continuously grew during the first half of 2010. However, according to the report, the market value is expected to grow only 3-5 per cent, lower than the previous expectation of 5-8 per cent.

PD House’s research and business development department also conducted an online survey of 2,548 people on consumer attitudes nationwide on the preferred financial source for new home building. The survey showed that almost 80 per cent of the target group would get a loan from banks rather than use their own savings. This is quite the opposite to the results conducted 5-6 years ago where over 60 per cent preferred using their own savings to build a new house.

Sitthiporn Suwannasut, Chairman and Director-General of PD House Home Builder Centre, said that over 70 percent of its clients would apply for a mortgage to build their new home during the past 5-6 months.

“This is a growing trend. In the past, consumers thought that it was difficult and complicated to get a home loan from the banks. Some didn’t even realise that they were allowed to do that. But now it’s something different,” said Sitthiporn. “Most people believe that their dreams of having a new house could become true more easily once they manage to get a loan while some don’t think they can save enough money to keep up with the increasing house prices”.

SOURCE: Property-Report.com

Buyers in a property showroom

But agents are not to “twist the information and use them as scare tactics on customers”.

The email added that agents should “never use overly strong words like the market is going to crash”.

This follows a story carried by MediaCorp on May 31 that some agents are employing “scare tactics” to close deals.

Emails forwarded to MediaCorp earlier, detailed how some agents are using the government’s recent land sales as a bargaining tool to lower client expectations of property prices.

One agent disclosed that a deal was closed after telling the client that the “market is going to crash”.

ERA said it has investigated the alleged complaint.

It found that the transaction was sealed at market price, fully supported by a bank valuation.

The property firm added that no scare tactics were involved.

As such, no disciplinary action will be taken against the agent.

The strong take-up in Q1 2010 was anchored by new launches such as Altez in the Tanjong Pagar area, Cube 8 at Thomson Road and Holland Residences.

Based on caveats lodged to date, about 33.7 per cent of buyers in Q1 2010 had HDB addresses, often regarded as a proxy for HDB upgraders.

On the whole, home prices in Q1 2010 reflected increases of 2-5 per cent over the preceding quarter, according to CBRE, supported mainly by resale transactions as developers have maintained prices of new launches in the same locations at last year’s levels.

LAUNCH prices of new luxury residential projects in Singapore rose about 20-25 per cent last year and could appreciate a further 10-15 per cent this year, says CB Richard Ellis.

Rentals of completed luxury homes, which slid 10.5 per cent in 2009, could increase 5-10 per cent this year, according to the property consulting group.

Already, in the first two months of this year, prices have been climbing steadily, CBRE said, citing sales of 88 units at Urban Suites at $2,500 psf on average and about 35 units at The Laurels at $2,500-2,900 psf, although the latter features smaller units. Both projects are in the Cairnhill area.

Other luxury projects that will be marketed in the first half of 2010 include Ardmore 3, Nassim 8 and those on the sites of Grangeford and Parisian, CBRE said.

The Singapore residential property launch meanwhile continues to teem with activity in various market segments.

At Meyer Road, Hong Leong Holdings is releasing this week close to 60 upper-floor units at Aalto, a 27-storey freehold condo with a total of 196 units. Prices will start from $2,000 psf.

‘Absolute pricing ranges from $3.1 million for a 1,442 sq ft three-bedder on the 18th floor to $5.3 million for a 24th level four-bedroom apartment of 1,959 sq ft,’ the company said in a statement yesterday. A handful of lower-floor units are also available, from $1,500 psf.

The project was first launched in early 2008 and as at end-January this year, 118 units had been sold. Aalto comprises three and four bedroom apartments and penthouses. It is expected to receive Temporary Occupation Permit in September this year.

Hiap Hoe is also doing an official launch of its 200-unit Waterscape At Cavenagh this week. So far, it has sold 96 units. The average selling price is about $1,880 psf. The seven-storey freehold condo comprises one-to-four-bedroom apartments, and penthouses.

Later this month, Hong Leong Group could release a 202-unit project on the former Ong Building site at 76 Shenton Way. TID Pte Ltd – a joint venture between Hong Leong and Mitsui Fudosan – is also expected to preview in a few weeks Nathan Suites, a 24-storey project at Nathan Road, opposite the Malaysian High Commission. The project’s 65 units comprise two, three and four-bedroom apartments as well as penthouses.

CBRE, in its release on the luxury residential market, said that recent sales activities point to the start of a revival in this market segment. ‘It is likely that this interest in luxury homes is sustainable given the low interest rates and improving economic environment,’ the firm’s executive director, Li Hiaw Ho, said.

However, he predicts that ‘we are unlikely to see runaway prices the way we did in 2007 as homebuyers will be less impulsive and more discerning following the latest government measures’ to cool the market.

Back then, average launch prices of new luxe projects jumped from $1,800-2,600 psf in 2006 to $2,000-4,000 psf in 2007.

Overseas buyers returned at upmarket property launches in Singapore in Q4, as seen at Marina Bay Suites, Urban Suites, and Kasara the Lake, a plush villa development at Sentosa Cove. This bodes well for the market segment.

Elsewhere in Asia, prices of luxury homes in the secondary market edged up in Beijing, Shanghai, Guangzhou and Hong Kong by 6-10 per cent in Q4 2009 over the preceding quarter while remaining largely stable in other markets.

Singapore saw a 2.7 per cent quarter-on-quarter gain in average prime residential price in the secondary market to $2,260 psf in the fourth quarter. Despite strong sales, leasing demand for luxury homes remained rather fragile in some cities, with Beijing, Guangzhou, KL and Ho Chi Minh City posting a modest rental drop in Q4.

Leasing markets in Hong Kong, Shanghai and Bangkok began to gradually recover, with rents for luxury homes rising by increments ranging from one per cent in Bangkok to 6 per cent in Hong Kong.

Looking ahead, CBRE forecasts that end-users and investors may adopt a more cautious approach in the next couple of months following the introduction of measures that tighten lending for property in certain markets.

Source : Business Times – 4 Mar 2010

The company’s Bangkok project features a suspended building formerly named Harbour View, on a one-rai site by the Chao Phraya River in Charan Sanitwong Soi 72, bought from Siam Commercial Bank for 150 million baht.

“Construction was frozen at 50% completion with an unfinished 30-floor structure. We had civil engineers check the remaining structure and found it is safe,” she said. The building also now has an extension to its construction permit.

With the new name My Resort@River, the site will also house 10 high-end townhouses. Unit prices have yet to be finalised, but the total value is 1.4 billion.

Equity Residential’s second project, the 2.6-billion-baht My Resort Hua Hin, will feature six seven-storey buildings on a nine-rai plot in the beach town.

The company is in talks with financial institutions for funding. The site will be developed by two subsidiaries – Equity Chao Phraya Co Ltd and Villa Hua Hin Co Ltd – with registered capital of 200 million baht each.

Over the coming weekends, the company will also relaunch its My Resort Bangkok, a 1.8-billion-baht condominium developed from a suspended building on Phetchaburi Road near the Asok intersection, said Ms Maturose.

The half-completed building was formerly named Oasis and owned by Srinakorn Land, the property arm of the Techapaibul family. Launched in 2008, My Resort Bangkok has currently sold 60% of 382 completed units, priced at 73,000 baht per square metre on average. The price will be raised to 80,000 baht per sq m after the relaunch.

“The political and economic situations in the past few years were unfavourable and our projects had no sales and marketing activities so sales have been frozen since then,” said Ms Maturose, who joined the company last month. “Also, we are new in the property sector. Consumers might not be confident with our brand so we are completing construction to re-launch the project.”

Equity will start transferring units at My Resort Bangkok next month.

The company expects to close sales by year-end, helped by competitive prices with nearby projects, said Ms Maturose, a 42-year-old judge and wife of Swechak Lochaya, the major shareholder of the listed developer Everland Plc.

This move by the Government is definitely catered to reducing the pressure on mass market owners and get more out of those in the wealthy segment of society but perhaps it is also a positive indication that it has noticed the improving market sentiments, and especially on the high-end property sector?

Market Sentiment
Though the responses vary, market watchers as well as developers agree that the high-end market will see a healthy growth this year. Jones Lang LaSalle (JLL) stated that the market will progress due to improved market sentiment, better than expected improvement in regional economies, and foreign buyers returning to the Singapore market. The Intergrated Resorts (IRs) will also attract more investors.

Chua Chor Hoon, head of SEA Research, DTZ revealed: “There is more interest in the high-end property market. More foreigners are coming in to buy.”

Christopher Fossick, managing director, Singapore & SEA of Jones Lang LaSalle believes that there is space for growth given the fact that prices are nowhere near 2007 levels, which could lure investors into the luxury market.“Launches of 2009 of condominiums were very minimal so there was little opportunity to test the market. But coming towards 2010, we are likely to see more launches,” he says

Developers seem to have more optimistic outlook for the upcoming year. Kemmy Tan, director of International Real Estate, YTL Corporation says that the company feels positive for the year ahead: “The re overwhelming demand for Kasara villas during the pre-launch marks the strong return and renewed optimism of high net-worth investors and homeowners to the ultra luxury market in Singapore, particularly in Sentosa Cove,” she says.

Another developer, CapitaLand has several projects in the pipeline. Liew Mun Leong, president and ceo, CapitaLand Group: “We will continue to recognise income from residential sales and have a healthy pipeline of over 2,600 residential units.”

Gradual progress or giant leap?
In a fourth quarter results of 2009 (4Q2009) report released by research company Colliers, it cited that developers had launched 14,104 new private homes in 2009, surpassing the previous high of 14,016 units in 2007 by 0.6 percent. Over the same period, buyers picked up 14,725 units, just 0.6 percent shy of 2007’s peak levels of 14,811 units though it is important to note that the mass market dominated the primary market activity.

Though there is healthy market sentiment on the part of developers as well as investors, does that mean that luxury property will make a great leap to 2007 levels (be it prices or units sold) or is it a more gradual progress?

“In a macro high-end view, the recovery or rebound in the luxury end of the market is less so than in the mass market. What we saw in 2009, in the final three quarters is that activity picked up, particularly in the middle mass market that pushed up prices,” says Fossick. “But the recovery in the luxury end of the market was more muted, and did not come up to the levels as in 2007 and the ones that did go up were a bit more isolated.”

To take a further look into this topic, take a look at URA´s recently released January 2010 private residential property statistics. A total number of 1,476 units were sold in January 2010, which makes up about 80 percent of the 1,860 new homes sold in the entire fourth quarter of 2009.

According to data, the highest number of new homes that were sold were from the Core Central Region (CCR). RV Edge by developer Fortune Estates Pte Ltd sold the most number of units at 91 units. CapitaLand´s Urban Suites sold at a favourable number of 88 units (it has sold 126 units out of 140 thus far) while Parvis by Calne Ptd Ltd and Holland Residences by Allgreen Properties sold 73 and 67 apartments, respectively.

In the Rest of Central Region (RCR), a total of 350 new homes were sold – Cube 8 with 167 units,The Shore Residences with 144 units, and Siglap V with 50 units.
Some of the properties that had high median prices were Marina Bay Suites and Urban Suites at $2,506 per sq ft while the Marina Collection was at $2,500 per sq ft. Other developments in the RCR such as Alto and Concourse Skyline saw a median price of $2,011 per sq ft and $1,788 per sq ft, respectively.

Thus far, YTL Corporation has already sold at least 60 percent of villas in both the high-end developments in Sandy Island and Kasara – The Lake in Sentosa Cove, the latter having a steep asking price of $14 -$22 million for a villa.

Li Hiaw Ho, executive director, CBRE Research explains that though the improving market sentiment led to these figures, it could also be pent-up demand after three months of lower sales. “Following the Chinese New Year holidays, we expect developers to launch more projects such as The Vision, The Estuary and Sentosa Quayside. Demand should continue to remain buoyant, with the interest in high-end projects increasing steadily throughout 2010,” said Ho.

Also, DTZ´s report on 4Q09, noted that developers launched 14,103 new homes for sale in 2009, as active as they were in 2007 when they launched 14,016 new homes.

Such data proves that the luxury market has gotten a real good start to the year but whether it will hit the 2007 peak has yet to be seen. The amount of private housing units in the supply pipeline as at Q409 – 22,390 units and 17,390 units in CCR and RCR, respectively. With more than 130 apartments from the the coveted Marina Bay area and 900 units from Sentosa Cove yet to be out on sale, it is indicative of developers´ postive outlook.

Increase in Prices?

According to URA Q409 statistics, prices of non-landed properties in CCR increased
by 7.3 percent in the fourth quarter, and prices of non-landed properties in RCR increased by 9.5 percent. For the year 2009 as a whole, prices on landed properties increased by 7.7percent. However, the property price index (PPI) showed that at Q407, the CCR and RCR areas had a PPI of .3 and 156.6, while the PPI of Q409 was at 177.2 (CCR) and 153.7 (RCR). It denotes that prices have not reached the peak levels.

Fossick states whether prices of launches get nearer to 2007 levels can only be considered at the later part of the year and believes it to be a move at a moderate level.

DTZ´s Chua emphasises this view. “We can expect price increase to be more moderate this year, about 10 percent, compared to the initial run-up from the bottom last year. However, selected popular projects could see higher increase in prices,” she explains.

However, Raymond Chow, ceo/president, Ray International affirms that high-end property prices will only increase. He cites that Urban Suites is able to sell at a price of $2400 – $2,600. Though he does admit that the increase in prices depends on the location and quality of the project.

He states: “The developers are obviously always be more optimistic, they will generally raise their prices to sell. As long as it is not overrated they should be able to sell. We could give ourselves till mid-year, June or July, and do not be surprised if prices hit about $4,000. Grange Infinite hit about $3,300 per sq ft and the surrounding area prices is moving upwards.”

Rental Rates

URA statistics at Q42009 revealed that for the whole of 2009, rentals of non-landed properties in CCR and RCR decreased by 15.9 percent, 14.9 percent respectively.

Fossick of JLL says that rental growth can be expected to increase but cautions that lots of rents were being paid by the MNCs and now these businesses are controlling costs. “A creation in jobs and improved sentiment might push up rentals a bit but overall, the demand would remain steady or increase slightly that would allow some rental growth.”

JLL figures predict that there might be a muted rental growth at three precent y-o-y growth by end 2010. Some expected physical completion of about 7,300 units in 2010 may put downside pressure on any uptick in housing demand arising from improved economic condition.

Better than other markets?

The Weekend Today ran an article on 6 February, Singapore luxury home prices to lag behind those in HK. It revealed that Singapore´s luxury home prices will not match those in HK as the building ahead of two new casino projects will present nine times the number of new apartments over the next three years than in HK. According to the article, Goldman Sachs report stated that luxury property prices are about 19 percent below their 2007 peak. In 2007, prices went as high as $5, 265 per sq ft while a bungalow in Sentosa sold at $1,753 per sq ft (for 17,115 sq ft) last year.

JLL Q409 report reveals that Singapore is approximately 16 percent lower than its previous peak in 1Q08. It is still competitive as compared to other Asian cities as some have either surpassed or are reaching the previous peak soon. This includes Hong Kong, 0.4 percent away from its previous peak in 2Q08; Jakarta 0.7 percent away from its previous peak in 4Q08; Shanghai, 33.8 percent higher than its previous peak in 2Q05; and Kuala Lumpur, 0.2 percent higher than its previous peak in 4Q08.

Ray Chow expresses that Singapore´s high-end market will actually do better than Hong Kong, the latter known to have sky rocketing prices. “Although HK is expensive, it has its own market but in terms of Asia Pacific, I would dare to say that Singapore real estate market has been faring better. I rank HK and Thailand behind us. The Indonesia and Malaysia markets are slow; a unit in KLCC is not easy to sell depending on its location.” He expresses convenient travelling time in Singapore makes the country more appealing to many investors.

Says Chua of DTZ, “Compared to Hong Kong, prices in Singapore have not run up as much. Prices of high-end condominiums in KL are relatively cheaper at RM574 per sq ft compared to SGD2400 per sq ft for luxury condominiums in Singapore.”

Tan of YTL is optimistic and states that Sentosa Cove area makes the country a lucrative place to invest. “Sentosa Cove is a signature residential development that is recognised to play an integral role as part of this world-class luxury experience in here. Sentosa Cove’s prime location and waterfront living appeal immensely to affluent foreigners and local residents, thereby setting Singapore apart from other Asian countries.”

Upcoming projects to watch

The Holland Collection in Holland Road, Trillium near Grange Road, and Marina Collection by Lippo Realty. Ardmore 3 in Ardmore Park by Wheelock properties. Le Novel Ardmore, Ardmore Park by Wing Tai Properties. Seascape by Ho Bee Group. Sentosa Quayside and Shelford Suites by City Developments Limited (CDL). Westwood Development (launch date yet to be confirmed) by YTL Corp. The Interlace at Farrer Road; The Nassim (55 units to be released by mid year); Orchard Residences by CapitaLand. Grange Infinite by Grange Properties Ptd Ltd.

SOURCE: property-Report

They were caught by surprise at the rapid market recovery, they say.

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‘Many of us are now caught with a depleting land bank,’ the Real Estate Developers’ Association of Singapore (Redas) president Simon Cheong said.

‘We believe the long-term solution to a sustainable and stable market is still adequate supply,’ he added.

Credo Real Estate’s deputy managing director Tan Hong Boon summed up the mood: ‘You never know what will happen. While the going is still good, developers will want to launch quickly. This is particularly so for mass market projects.

The Government recently stepped up the supply of development sites after a lull, and believes supply is adequate.

Yesterday, a 3.02ha site at Hougang Avenue 2 was offered to developers. If interest is adequate, a tender will proceed.

Another reserve list site will be offered by May, on top of confirmed list sites, which are tendered without precondition.

The comments by Mr Cheong and Mr Tan at the Redas Chinese New Year lunch at Capella Singapore yesterday came a week after market cooling measures.

The Government imposed a duty sellers must pay if they sell within a year of purchase. It also capped bank loans at 80 per cent of a sale price, from 90 per cent.

Mr Cheong said developers want land supply fast-tracked to satisfy buyer demand to minimise speculation to ease the pressure for more anti-speculative steps.

‘Given the unexpected return of an active property market, developers over the next few months would also be actively bidding for more land,’ he said.

Redas members look forward to more confirmed list sites to replenish land banks, he said. They are looking to Government land, given limited sources of private land. A developer who declined to be named said private land owners were asking for the sky ’so we can’t buy’.

Mr Cheong said developers would rather have this problem than the bleak effects of last year’s meltdown in the banking system. ‘Managing upside is always easier than managing downside.’

The anti-speculative steps were a timely reminder, said Frasers Centrepoint chief executive Lim Ee Seng at the lunch. ‘Exceptional jumps in prices are not good for us.’ Still, he said: ‘No matter how high it gets, it will still obey the law of gravity.’

An anonymous developer said the measures had hurt sentiment a little. ‘If there are 100 buyers, maybe 10 will change their minds. I expect volume to moderate a bit.’

Still, so far the measures appear to have had little or no impact on recent sales. ‘The market is still hot,’ said an industry observer. The 608-unit The Estuary in Yishun, whose preview opened on Wednesday, has sold over 200 units.

The average price for the 99-year leasehold condo is $750 per sq ft, with units facing the Lower Seletar reservoir costing around $800 psf on average.

Separately, City Developments boss Kwek Leng Beng said at a results briefing for CDL yesterday that sentiment would remain strong among genuine buyers, despite the government measures.
SIT to offer industry-focused Degree Programmes to Poly Grads

Mr Cheong addressed guest of honour Finance Minister Tharman Shanmugaratnam, saying developers were disappointed at being left out of the Budget.

But they were happy at the productivity push given the long-term gains. Redas called this ‘a deferred payment hongbao’.

Looming launches include the 151-unit Seascape in Sentosa Cove and Cheung Kong Holdings’ 295-unit The Vision. Far East Organization and Frasers Centrepoint plan to release Waterfront Gold in Bedok Reservoir soon. Allgreen may launch RV Residences in River Valley and unsold units at Cascadia in Bukit Timah.

Higher-income property owners, however, will have to pay slightly more for their property tax.

Delivering the Budget statement in Parliament on Monday, Finance Minister Tharman Shanmugaratnam announced that a three-tier property tax system will be introduced at zero, 4 and 6 per cent.

The first $6,000 of the annual value (AV) of a home – which is calculated based on the monthly market rent the home fetches – will be exempt from property tax.

The next $59,000 of the AV balance will be taxed at 4 per cent, and the balance of AV in excess of $65,000 will be taxed at 6 per cent.

The new property tax system will benefit most Singaporeans. Owner-occupied homes will enjoy tax savings of $240 as a result of the exemption of the first $6,000 of AVs.

Mr Tharman said that a moderately progressive property tax system, together with an income tax system that collects more taxes from better-off individuals and a flat GST rate that everyone pays, will together form a fair system of taxes in Singapore.

‘Everyone pays something, but the rich pay more. Taken together, the overall burden of taxes will and must remain low by international standards,’ he added.

Currently, owner-occupied residential properties are taxed at a concessionary 4 per cent rate. All other properties are taxed at 10 per cent.

Owner-occupied residential properties with Annual Values (AV) below $10,000 also currently enjoy the on-going 1994 property tax rebates ranging from $25 to $150, depending on the AV of their properties.

These will be replaced by the new property tax schedule, for property tax payable from January 2011.

SOURCE: Straits Times

They also foresee steps being taken to make it easier for the needy to benefit from the Workfare Income Supplement (WIS) scheme for low-wage workers.

Another major subject they expect the Budget to tackle is productivity, with the Government set to offer incentives to improve workers’ skills as Singapore aims to raise its productivity by 2 per cent to 3 per cent a year.

These issues were among the dominant recommendations made in the Economic Strategies Committee’s recent report. It had called for, among other things, a slowdown in the inflow of foreign workers, greater support for older and low-wage workers, and upskilling workers for higher productivity.

MPs believe that one way to help the needy is to make Workfare more flexible. They include Sembawang GRC’s Lim Wee Kiak, Ang Mo Kio GRC’s Lee Bee Wah and Hong Kah GRC’s Amy Khor.

Their suggested changes: make the payout more frequent and the qualifying criteria more flexible.

Currently, a worker older than 35 and earning less than $1,500 a month can receive Workfare if he works three out of six months. Payments are made twice a year.

Dr Khor also expects the Budget to give training grants for these low-wage workers to upgrade their skills to secure better-paying jobs. ‘Unless help is extended to them, there would be a class of workers who will be left behind amid the rapid economic shifts taking place around the world,’ she said.

With productivity growth earmarked to fuel Singapore’s growth in future, Ms Indranee Rajah, a Tanjong Pagar GRC MP, expects the Government to offer subsidies and incentives to encourage training.

Added Dr Khor: ‘There are likely to be more customised training, re-training and skills upgrading programmes for different sectors to suit workers’ needs.’

Ms Lee, on the other hand, hopes the Skills Programme for Upgrading and Resilience (Spur), which heavily subsidises worker training, will be expanded to benefit more professionals, managers, executives and technicians, or PMETs.

To further sharpen the distinction between citizens and permanent residents, particularly in public housing, Tampines GRC MP Sin Boon Ann foresees housing subsidies and rebates being adjusted, ‘with less for PRs, more for Singaporeans’.

Ms Lee suggested that the income tax structure be strongly discriminated in favour of Singapore citizens.

She also expects funds to be allocated to build new infrastructure in housing estates for the rapidly greying population.

To ensure that health care for the elderly stays affordable, Dr Khor sees the Government topping up Medifund, which helps needy Singaporeans pay their medical expenses, and ElderFund for the elderly poor to settle their hospital bills.

MP Christopher de Souza, of Holland-Bukit Timah GRC, said the new Budget will allow the Government to identify how the previous Budget lifted Singapore out of the recession, list the measures that worked and collate them into a ‘battery of best practices’ for future reference.

‘In the event that we go through difficult times in future, we’ll have these measures to see us through,’ he added.

Meanwhile, growing chatter about an impending general election has led some to wonder if the upcoming Budget will look like previous pre-election Budgets – plump and laden with goodies for all.

Dr Lim is not hopeful.

‘The Government gave out a lot last year to boost the domestic economy. I think they will take back a bit now.’

He said with a laugh: ‘No Economic Restructuring Shares or Singapore Shares this year, I think.’

This article was first published in The Straits Times.

From Saturday, it will introduce a seller’s stamp duty on all residential properties and lands that are bought after today and sold within one year from the date of purchase, and lower the housing limit to 80 per cent of the total purchase price.

These new steps came less than six months after the Government introduced a set of measures to temper the exuberance in the private residential market last September.

‘While the September 2009 measures helped to cool the property market, there are recent signs that it is starting to heat up again,’ said a joint statement from the Ministry of National Development, Finance Ministry and the Monetary of Singapore.

Demand for private housing units spiked sharply in January, with the the number of units sold by developers tripling that in December, and making it the highest monthly total since last September. Prices have also risen sharply in the second half of 2009, at a faster rate compared to previous rebounds from the troughs of property cycles.

There was no let up in the January price increases. Mortgage lending also soared by around 12 per cent year-on-year through 2009, said the statement.

‘While the current level of speculative activity in the market is still lower than what it was at the height of the property market boom, and overall price levels are below the previous peak, there is a risk that the market could overheat in the next few months, fuelled by low global interest rates and positive sentiments associated with the economic recovery.

‘Any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy. Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects. Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves.

‘Therefore, the Government has decided to introduce calibrated measures now to temper sentiments and pre-empt a property bubble from forming.

‘We will tighten the supply of credit to the housing market to encourage greater financial prudence among property purchasers. The Government prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.’

SOURCE: Straits Times