Friday, January 23, 2009

Playing The Waiting Game

Source : The Straits Times, Jan 17, 2009

Home buyers believe property prices are set to fall further and hence, are biding their time

When investor relations consultant Gary Teo reaches for his newspaper every morning, he reads the property news first.

He and his wife, Grace Tan, 32, a senior QA engineer, are looking to buy a place of their own. They have been living with his parents in a terrace house at Novena since they got married in September last year.

'I've been wanting to live independently and now that I'm married, all the more I want to live on my own,' says Mr Teo, 31.

However, he is in no hurry, although he has been househunting since 2007. 'I'm waiting for prices to fall further,' he says, confident that it is now very much a buyer's market.

So he keeps tabs on property sales online and pores over the classified ads. The couple want to buy a three- or four-bedroom apartment in central Singapore. 'Our budget is no more than $1 million,' he says.

They either did not like the few apartments they have inspected or the asking prices exceeded their budget.

Many others are like Mr Teo: buyers playing a waiting game, believing that sellers will blink first.

And all signs point to buyers getting their way, although Mr Eugene Lim, 42, associate director at property agency ERA Asia Pacific, says the private property market is currently at a 'standstill' because sellers are still struggling to come to terms with the drop in property prices.

Mr Chris Koh, 42, director at Dennis Wee Properties, says it used to take about two to four weeks to sell an apartment. Now he sees some apartments on the market for more than three months because 'the prices asked for are too high and unrealistic'.

Home buyers prefer to wait till second half of the year

The truth is, private property prices have indeed fallen, some by as much as 25 per cent over the past year (see graphics).

Sensing this, 'buyers are just starting to bargain-hunt', says ERA's Mr Lim.

Mr Koh agrees that 'home buyers are taking the wait-and-see approach and thus are not committing to purchases'.

He adds that buyers expect property prices to fall even further and they are looking to buy only 'in the third or fourth quarter of this year'.

The reason is simple: Analysts are predicting further uncertainty in the economy and home prices may fall another 10 to 20 per cent.

Today's home-hunters are 'mostly young couples who are looking to buy their first home', says Mr Koh, unlike upbeat times such as in 2007 when people bought property for investment.

Graphic designer Edmund Seet, 35, and communications consultant Delicia Tan, 30, are getting married in June. Armed with a $600,000 budget, they are looking for a two-bedroom apartment in East Coast.

'This will enable us to have more cash for renovations and furnishings,' says Ms Tan.

Like Mr Teo, she believes that property prices will drop further during the year and so have yet to sign on the dotted line.

She and her fiance monitor property listings regularly, visit new showrooms in the area and keep a lookout for banners and signs that advertise units for sale.

'We may buy only in June,' she says.

They are playing it cool because they have a back-up plan: They will rent an apartment from a relative if they cannot find a suitable one to buy after their wedding.

There is no doubt buyers have the upper hand in today's market, says Mr Vincent Koh, 36, vice-president at HSR International Realtors.

He cites examples of sellers who will let go of their property at 10 per cent less than their desired selling price.

'Some are so desperate, they may offer to pay for the buyer's renovations, so they can get the property off their hands,' he says.

It is not just individual sellers who are finding it tough.

The property experts decline to give specific details but reveal that they have heard of developers who throw in sweeteners such as waiver of maintenance fees to entice buyers.

Which is good news, but not good enough for many buyers such as art director Adrian Low, who prefer to wait.

Currently renting a two-bedroom apartment in Lavender, the 36-year-old bachelor wants to buy a three-bedroom apartment in the Braddell Road area to be nearer his office in MacPherson but does not want to pay more than $900,000.

The 20 apartments he has viewed are not close to an MRT station and eating places. More importantly, the prices he has been quoted are not ideal.

'I'm waiting till prices drop to $800,000,' he says.

He could get his wish, because the times are a-changing.

In 2007 when sales were upbeat, 'sellers were more arrogant and would often increase their price once an offer was received', recalls ERA's Mr Lim.

In the current climate, he says, 'sellers' instructions to agents are to relay any offer to them for consideration'.

Bigger HDB Grants For Buyers

Source : The Straits Times, Jan 23, 2009

FIRST-TIME home buyers were given a leg up on the property ladder yesterday with the expansion of a grant designed to help financially struggling home hunters.

Another 2,700 first-timers will qualify for the additional CPF housing grant every year, due to changes announced by Finance Minister Tharman Shanmugaratnam.

In a rare move, the Government has lifted the income ceiling for first-time home buyers qualifying for the additional grant - from $4,000 a month previously to $5,000 now.

At the same time, the grant's maximum amount has been raised from $30,000 to $40,000.

This comes about 18 months after the additional housing grant was raised from $20,000 to $30,000 in August 2007.

Then, the eligibility criterion was also lifted to $4,000 from $3,000.

Mr Tharman said the total number of households benefiting from HDB's additional housing grant scheme will now be boosted to 8,000 annually.

The enhanced scheme, which aims to ensure that public housing remains affordable to first-timers, will double the estimated cost of the scheme to about $150 million per year, he said.

Market watchers observed that the additional housing grant - typically aimed at the low-income group - is now being extended to the lower middle-income group.

PropNex chief executive Mohamed Ismail said this departure was a 'positive move' as HDB prices have risen about 30 per cent in the last two years.

'With prices going up, monthly mortgages are also rising. In this difficult time, the grants will really help first-timers who want to buy a home, and start a family,' said Mr Ismail.

Mr Samuel Ng, 43, head of the Marine Parade Family Service Centre, said the latest HDB initiative will address some newlyweds' concerns during this crisis.

In particular, the move seems to address the 'sandwich class' or what he calls, the 'middle poor'.

'For the really low-income, there is already a support network in place for them. But the low- to mid-income families often find themselves squeezed, and find that there are fewer social initiatives that cater to them.'

Housing, Mr Ng pointed out, is crucial to starting a family. This is one of the priorities for the Government.

Mr Tharman said yesterday that the Government will spend $1.6 billion this year - and the same in each of the next three years - to support marriage and parenthood.

These include initiatives such as government-paid maternity leave, infant-care and childcare subsidies.

Ms Y.L. Huang, a 25-year-old teacher, welcomed the news as her income combined with her fiance's exceeds the $4,000 mark for the housing grant.

'Knowing we now qualify for a bigger housing grant makes buying a new home a bit easier,' she said.

Couple Sue Agency After Buyer Flips Flat For Profit

Source : The Straits Times, Jan 22, 2009

WHEN a married couple sold their downtown apartment for $688,000 in 2007, they thought it was the best deal they were going to find.

But soon after they granted the buyer the right to purchase the property, the two-bedroom Keng Cheow Street apartment was re-sold for $945,000.

Mr Yuen and his wife Madam Wong allege that the real estate firm did not do its best to find buyers and that it made a 'secret profit' off the deal. -- PHOTO: LIANHE ZAOBAO

It was only later that Mr Yuen Chow Hin and Madam Wong Wai Fan found out about the second deal.

They also learnt that the woman who bought their flat - and flipped it for a healthy profit - was married to the boss of their real estate agent.

The couple cried foul, and are now suing ERA Realty Network in the High Court, seeking $257,000 - the difference between the two sale prices - and the return of about $7,300 in commission.

They allege the company did not try its best to find buyers and made a 'secret profit' off the deal.

ERA disputes that and says the couple have no basis to sue it since the agent was not an employee but an independent contractor.

Yesterday, the hearing entered its third day, with ERA senior vice-president Marcus Chu taking the stand.

He denied that the agency earned any secret profits and said that the real estate agent, Mr Jeremy Ang, did nothing wrong.

Mr Chu said ERA agents are required to disclose the identity of the buyer only if that person is the agent or a member of his immediate family.

This was echoed by Mr Ang, who also took the stand.

Mr Yuen, 50, and Madam Wong, 48, hired Mr Ang to sell their apartment at The Riverside Piazza in June 2007. He told them he would advertise the property.

Mr Ang helped sell his clients' flat in Riverside Piazza (above) to his boss' wife, who soon resold it for a profit. He contends that he did nothing wrong. -- PHOTOS: LIANHE ZAOBAO AND DESMOND LIM

In early July, an offer came for $650,000. After negotiations, the couple granted the buyer, Madam Natassha Sadiq, an option - dated July 12 - to buy the flat for $688,000.

Meanwhile, Madam Natassha's husband - Mr Ang's boss - placed advertisements in the papers to sell the property for his wife.

On July 14, a buyer responded to an ad which asked for $945,106. Four days later, Madam Natassha granted the new buyer an option to buy the flat for $945,000.

Both deals eventually went through.

Mr Yuen and Madam Wong found out about the re-sale only after the Central Provident Fund Board asked them about the disparity between the selling price and the valuation submitted by the new buyer's banker.

Their lawyer, Ms Gan Kam Yuin, argued that ERA made little effort to get the best possible price for the flat.

She questioned why Mr Ang did not place newspaper ads for the couple. Mr Ang said calling up his regular clients, who included Madam Natassha, constituted 'advertising'.

Ms Gan argued that the firm had placed itself in a position of conflict of interest.

But Mr Ang said there was no conflict because the buyer was not himself nor his wife.

Madam Natassha and her husband, Mr Mike Parikh from ERA, are expected to testify today.

2-5% Contraction Looms As S'pore Sizes Up The Beast

Source : The Business Times, January 22, 2009

Q4's 16.9% q-o-q fall is steepest ever; 2009 outlook altered fundamentally: MTI

The recession hasn't run its course, but is already Singapore's sharpest and deepest downturn to date, the Ministry of Trade and Industry (MTI) said yesterday as it slashed its 2009 GDP forecast to a 'more realistic' contraction of 2 to 5 per cent.

And even if recovery does come in the second half, this would be the most protracted recession in Singapore's history. Indeed, it's quite a different beast from the recessions Singapore has had, MTI says.

Just three weeks ago, a 2 per cent GDP fall was the ministry's worst-case scenario for 2009.

But, following the steepest quarterly contraction to date in Q4 2008, the official forecast has, at the low end, now gone below market projections.

With preliminary December data in hand, the economy was found to have shrunk 3.7 per cent year-on-year (yoy) in Q4 - worse than initial estimates of a 2.6 per cent decline. Year-round, the 2008 GDP pace is a positive 1.2 per cent after a negative second half, thanks to a strong first quarter.

But against the preceding quarter, GDP plunged 16.9 per cent in Q4 as the key export-related sectors, as well as financial services, saw further declines.

'That's quite a serious contraction; almost like a fifth of the economy has shrunk,' Ravi Menon, MTI's second permanent secretary, told reporters yesterday. It is also the sharpest quarterly decline on record.

MTI expects another negative quarter in the current Q1, though not as bad as Q4 2008. Economists believe Q1 will see a worse year-on-year figure, if partly on a high base. The economy has already suffered three consecutive quarters of quarter-on-quarter (qoq) contraction - matching the 2001 duration - and two straight quarters of yoy decline.

New data releases in the last three weeks prompted MTI to fundamentally reassess Singapore's 2009 outlook, Mr Menon said, explaining the new forecast.

Global economic activity has declined faster and deeper than earlier expected, he said.

The repercussions - including a virtual collapse of regional trade towards the end of 2008 - on key sectors of the Singapore economy have also been stronger than anticipated, he said.

'The transmission mechanism has been much stronger than before. Typically, you do not see this kind of collapse in trade so early in the cycle. This has been accentuated by credit freeze in many parts of the world, loss of confidence which is inherently difficult to get a numerical handle on, and the continued bad news that has been coming out of the US, in particular.'

The hits Singapore has taken have extended beyond trade and manufacturing to, now, the financial services sector, which had held up until Q4 and 'is likely to contract further'. The jobless rate is also likely to hit the highs seen in previous recessions.

And how much Singapore's GDP will sink this year hinges on global prospects in the second half, particularly in the US, which is widely forecast to contract 1.8 per cent this year.

A V-shaped global rebound in the second half would pave the way for the more 'optimistic' 2 per cent contraction forecast for Singapore.

'Past recessions in Singapore have always ended with V-shaped recoveries and we cannot discount this possibility,' Mr Menon said. 'But the nature of the current recession is different and the likelihood of a sharp rebound at this point appears low.'

The other end of the forecast range - a 5 per cent contraction - covers 'a reasonably downside scenario of an extended U-shaped profile of the US economy, with no clear recovery in 2009'.

What's clear, in any case, is that this is 'a different kind of recession', he said. It is global in nature, 'different from the dotcom bust, different from the Asian financial crisis', and accentuated by credit problems that take a long time to unwind.

Singapore's worst annual GDP figure came way back in 1964 when the economy contracted 3.8 per cent. More recently, the economy crashed by 2.4 per cent in 2001, and by 1.4 per cent in 1985 and in 1998.

But recessions should be analysed from the peak to trough of the business cycle, Mr Menon pointed out.

'And in that regard this is already shaping up as, by many accounts, the deepest recession.'

The peak-to-trough plunge in growth this round has been the steepest ever. And the cumulative contraction in the economy since Q1 2008 looks to be the biggest to date.

But the recession must also be seen in the context of the previous years of rapid growth, Mr Menon said.

And the Singapore economy is now on a stronger footing - with robust economic fundamentals and ample resources - to deal with the downturn, he added.

Most economists stayed with their GDP forecasts, adding though that the risks are now squarely on the downside. But a few did take the cue to trim their estimates.

Growth May Sink To -5%

Source : The Straits Times, Jan 22, 2009

Govt cuts forecast again to a range of -5% to -2%; sharp rebound unlikely

THE Government has downgraded its growth forecast again amid what it brands the 'sharpest, deepest and most protracted recession' Singapore has ever faced.

What used to be the worst-case scenario a few weeks ago has now become the best outcome with the economy tipped to contract by between -5 and -2 per cent this year, according to the Ministry of Trade and Industry (MTI) yesterday.


The new figures reflect just how fast the global economy is deteriorating: just three weeks ago, the MTI forecast that gross domestic product (GDP) growth would come in at -2 to 1 per cent instead of between -1 and 2 per cent.

A 5 per cent slump this year would be Singapore's worst, beating the record of -3.8 per cent seen pre-independence in 1964. The 2001 recession saw a 2.4 per cent contraction.

The MTI said the downward revision was largely due to a faster and deeper decline in global economic activity, and stronger ripple effects on key sectors.

Said Second Permanent Secretary Ravi Menon yesterday: 'What took us by the depth of the deterioration in global economic activity and, second the spillover it has on the region and Singapore.

'Typically you do not see this kind of collapse in trade so early in the cycle.'

Downgrades in consensus forecasts for key economies such as the European Union and those in Asia, plus poor retail sales and jobs figures from the United States also added to the more pessimistic outlook.

Mr Menon said the upper end of the forecast is based on a 'V-shaped' rebound of the Singapore economy in the second half of this year, while the -5 level stems from an 'extended U-shaped' scenario with no 'clear recovery' this year.

'Past recessions in Singapore have always ended with V-shaped recoveries... but the nature of the current recession is different and the likelihood of a sharp rebound appears low,' he added.

OCBC Bank economist Selena Ling said: 'They appear to have bitten the bullet and included a worst-case scenario of -5 per cent, which supposedly covers most of the potential downside risks.'

Dr Chua Hak Bin, Citigroup's head of Singapore equity research, added: 'You also probably want to paint a scenario that could be fairly dire if you want to actually ask the public, the Parliament and the President for the right to tap on the reserves.'

Preliminary estimates showed that the economy grew 1.2 per cent last year compared with 7.7 per cent in 2007. Updated data will be out late next month.

Other figures out yesterday showed things were worse late last year than initial data showed. GDP shrank by 3.7 per cent in the fourth quarter, worse than the 2.6 per cent fall in the advance estimate.

It also plunged about 16.9 per cent in the last quarter from the previous three months - steeper than the 12.5 per cent retreat in the flash estimates and the largest such quarterly decline on record.

Economists say this year is likely to see year-on-year GDP contractions in the first three quarters before mild growth in the final quarter. They add that the slump should be most severe in the first quarter.

Manufacturing is estimated to have contracted by 4.1 per cent last year, down from growth of 5.8 per cent in 2007, as key sectors were hit by the rapid drop in demand from major markets especially, in the final quarter last year.

Total trade rose 9.6 per cent to $928 billion last year, but is tipped to slump by between 17 and 19 per cent this year - down from the previous forecast of a 6 to 8 per cent drop.

Non-oil exports are projected to dip between 9 and 11 per cent, compared to the previous prediction of between -1 and 1 per cent.

A silver lining is that lower oil and food prices should rein in inflation, which is now tipped to be between -1 and 0 per cent instead of 1 to 2 per cent. But job losses will rise, with unemployment reaching levels seen in past recessions.

However, sectors such as health, construction and the civil service will continue hiring, and new jobs will be created from the integrated resorts and recent investments in manufacturing.

HSBC economist Prakriti Sofat said: 'All eyes will now be towards the Budget, which no doubt will be aggressive, with businesses and households receiving a fair bit of help.'