Hear from both sides on 'Property Market Bubbles'

Private Sector

Bubbles can be 'good for property market'

CONTRARY to what some believe, bubbles can be good for the property market, said the executive director of Hong Kong's Cheung Kong (Holdings).

Mr Justin Chiu told reporters yesterday at the showflat of his company's latest project here that he likes property bubbles because they fuel sales volumes and price rises.

Mr Chiu - who was moved to dress up as James Bond at launch parties in 2004 to stimulate interest - believes that what he calls optimum sentiment can buoy prices by up to 30 to 40 per cent. Without it, prices can fall by 50 per cent.

'I like bubbles. It's my religion. In a property market or any market, if there is some bubble, people will be more enticed to go into the market.'

'If it's a flat market like in 2003 (when Sars hit), even though I give you a discount and I dress up like James Bond...I sell fewer than 10 units.'

Mr Chiu, who stressed that property investment was a long-term game subject to short-term fluctuations, said people would not invest in property unless there was confidence. 'If no one is buying, prices will fall...That's why I said I like bubbles. Bubbles mean everyone is coming in.'

At Cheung Kong's latest project, The Vision, sales are reported to be brisk despite relatively high prices. Buyers have bought 210 units of the 99-year leasehold condo in West Coast Crescent, attracted by early-bird incentives discounting quoted prices by 2 per cent to 3 per cent.

The official launch is to be held on Friday, but per square foot (psf) prices for the apartments have already set a net high benchmark for the West Coast area.

The 281 apartments were mostly priced around $1,000 psf to $1,200 psf. All except one of the 14 strata terrace houses - costing $3 million to $3.2 million apiece - have been snapped up.

Mr Chiu, who is nearly 60, says the prices are reasonable given the project's location and quality finishings. 'If the price is not reasonable, we would not be selling over 200 units in two weeks.'

Cheung Kong's next project will be a site in Upper Thomson Road, which it won the tender for last November with a price of about $533 psf per plot ratio. Mr Chiu said it is likely to attract mainly locals and Chinese nationals.

He said Cheung Kong was looking at a few pieces of residential land. And together with Hongkong Land and Keppel Land - its partners for the Marina Bay Financial Centre (MBFC) project - Cheung Kong is also looking at buying offices.

More details will be revealed at the topping-out ceremony of Tower Two of MBFC next month.

Mr Chiu noted that the Singapore property market is now enjoying boom conditions, and government measures will not alter that, though there may be other risk factors such as wars. He said the key lies in the message given out with the measures, instead of the effectiveness of the measures.

'To me, government measures are not important at all unless they are very drastic...Government is only a small factor of the free market forces. Unless it takes very strong measures...I don't think it can alter the trend, (but) it can slow down (the market). I don't think any Asian government is prepared to wreck the market.'

Fri, Mar 26, 2010
The Straits Times

By Joyce Teo

Singapore Government

S'pore Govt defends property measures

THE Government has come out strongly against suggestions by the president of the Real Estate Developers' Association of Singapore (Redas), Mr Simon Cheong, that the Government should bear some of the blame for the limited land supply and high private-property prices here.

Ensuring adequate supply and providing timely real-estate information to the public are part of the Government's role in maintaining a stable property market, said a Ministry of National Development (MND) statement yesterday.

'When necessary, the Government will also introduce measures to dampen market exuberance and prevent prices from running ahead of economic fundamentals,' MND added.

Mr Cheong had questioned the need for official intervention in cooling private-home prices at Wednesday's launch of a new private-home price index.

He cited two recent government land-sale tenders to highlight 'the dilemma' that developers face when bidding for such sites.

A bid for a Tampines site was mrejected in June 2008 but the tender was awarded this month at $421 per square foot per plot ratio (psf ppr), or 3.6 times higher that the original bid.

Similarly, a Ten Mile Junction mixed-use site with a failed bid in April 2008 went for $437 psf ppr, or 2.7 times higher than the original bid, last month.

While the higher bid prices generated more revenue for state coffers, they also worsened the supply-demand mismatch, said Mr Cheong.

'Had the (tenders for the) two sites (along with other tenders) been awarded back then at market prices, the residential market's current demand-supply mismatch may have been more smoothened and price increases for such mass-market projects more muted overall,' he added.

Disagreeing totally, MND said it was arguable that awarding the two sites at 2008 bid prices would have moderated property prices or given bidders a higher profit margin.

The estimated number of units offered by both sites ' 800 ' is small, compared to the supply of 60,476 private-home units in the pipeline as of last quarter, of which about 34,000 are still unsold.

Said MND: 'A reserve price is necessary, to ensure the Government obtains a fair market price for a site. It serves only as a guide.

'In the past, the Government has awarded sale sites even below the reserve price. For the two sites cited by Mr Cheong, the Government was not convinced that the bids represented fair market value rather than opportunistic bids, as there were very few bids for the sites and they were exceptionally low.'

The stand-off stemmed from both parties representing different interests, said Mr Donald Han, managing director of Cushman & Wakefield.

He told my paper: 'As a stakeholder, the Government is looking at things from a wider perspective, and does not want to see irrational price behaviour (with extremely high or low fluctuations).

'But developers are into profit-making, not running charitable organisations. So there is no right or wrong here.'

Mr Cheong may also have been reacting to the spate of measures the Government introduced to cool the private-property market while flat prices surged over the last few quarters, Mr Han added.

'HDB-flat prices have risen 30 per cent and cash-over-valuation has increased about 50 per cent over the last two to three years, but not much intervention has happened.

'Such price climbs have a knock-on effect, as many private- home buyers are HDB upgraders who push rates upwards in the mid-end segment,' he said.

Property bubbles form when different factors like upgrading, a surge in property investing and other factors come into play, said Knight Frank chairman Tan Tiong Cheng.

'Ultimately, everyone wants a steady property market rather than a volatile one,' Mr Tan said.

Fri, Mar 26, 2010
my paper

By Koh Hui Theng