Friday, July 31, 2009

Mah Sounds Warning On Property Buzz

Source : The Straits Times, July 30, 2009

Government will take action if excessive speculation develops

THE Government will take 'whatever action necessary' to prevent excessive speculation in the property market, said National Development Minister Mah Bow Tan yesterday.

Mr Mah's note of caution comes amid a buying frenzy that has gripped the real estate sector in recent months.

He told the media on the sidelines of an industry event: 'I wouldn't say there is excessive speculation at the moment, but there is some element of speculation involved.

'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.'

He also warned about a property bubble forming. 'Obviously it is not in our interest for such a bubble to form, because when it does, and bursts, which it inevitably must, then I think a lot of people will get hurt,' said the minister, adding that all parties concerned must ensure that such a bubble does not materialise.

'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.'

There are certainly signs of a red-hot market, including queues forming days before the launch of a new project.

Suburban condo Optima, next to the Tanah Merah MRT, drew lines snaking outside the showflat on Monday, though the unit does not open until tomorrow.

Real estate agents were also in the queues with blank cheques from clients.

Buyers at Ang Mo Kio were equally keen to put their money down at the 329-unit Centro Residences, reportedly paying $1,150 per sq ft, a price level typically seen in central districts.

Mr Mah said the Government was monitoring the market but added that it was uncertain if the activity is due to pent-up demand or generated by buyers responding to lower prices or low interest rates.

'It is in all our interest that the market is a healthy, sustainable one,' he said.

Property veteran Nicholas Mak, former head of research at Knight Frank, agreed that the key is sustainability of demand: 'Although now it seems it's a bit too much and too fast, with buying volume growing at an unsustainable rate.'

Speculation is on the rise, with the number of subsales in the second quarter at 940 compared with 412 in the first quarter of this year, he noted.

Mr Mah yesterday called on buyers to do their homework: Research prices, study information on upcoming supply and check data from the Urban Redevelopment Authority's website. 'Don't commit right up to the hilt...think about what if interest rates rise in the future, would you still be able to afford it?' he said.

He emphasised that there was plenty of supply in the pipeline: Of 62,350 uncompleted units of private homes, about 38,482 units remain.

The minister also announced that the confirmed list of sites in the Government's land sales programme could be reinstated if supply is needed.

The Real Estate Developers Association of Singapore backed up Mr Mah's comments that a bubble should not form.

It pointed out last night that not all the property launches have been snapped up. Only a select few have been highly successful for various reasons. This could also be a result of pent-up demand.

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