Thursday, January 29, 2009

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Ailing property sector got a special Budget boost but can it really revive the property market?

I am happy for the developers that were given a thin lifeline through this bad times.

But alas, the budget did not address the buyers sentiments for today and tomorrow market. Think about it so what if the developers are given a special boost? People are still not buying! Inventory still stuck.

It is true that current prices have soften somewhat as compared to 2007/8 levels. For those who can afford, perhaps it's not bad a time to accquire your choice property. You can part away your money and help the developers pull through bad times. Your generosity will be much appreciated by them.

But for the average joe or bargainers, prices are still 50% higher than that of 2006/7 levels! For home owners, there's a major difference between a HOME and a HOUSE. When mortgage loan is at stake of repayment during such times, your HOME where one finds comfort, will become simply a HOUSE.

Read deeper my friends, the situation is so bad for real estate that the government had to give a lending hand to mitigate the impact. Demand are simply diminishing as we move deeper into 2009.

Even Tharman is not sure if 2010 will recover. And pls dont tell me abt Mr. Obama. 2 days after his inaugural, Dow Jones fell briefly below the psychological of 8000! "Change we must?!"

I am an optimistic person but yet realistic. I do wish things will recovery soon as I need a HOME over my head. But given all obvious indicators, the directions of the pole are clear, South.

If we continue to see demand trickle based on current bad market sentiments, a thin lifeline will simply becomes a thread. It snaps... Therefore?

The above comment is posted by Humble Bee in the Singapore Property Forum with reference to the news article below:

Jan 22, 2009
Budget 2009
Boost for property sector
By Fiona Chan
THE ailing property sector got a special Budget boost on Thursday, as a host of measures was unveiled to help real estate companies.

With more developers delaying their launches to wait out the downturn in buying demand, the Government focused mainly on extending aid to them in this area.

Property tax was deferred for two years for land approved for development, so developers sitting on their land bank will not have to pay this tax - which can amount to millions of dollars - for the time being.

Specific attention was also paid to developers who bought government land sites, and foreign developers who own private residential land here, as there are stricter rules that apply to them.

Normally, they have to develop the land within six years, in order to ensure that these developments are completed 'within a reasonable period after the land sale', said the Government. They also cannot resell the land without developing it.

But now, these developers have been given a one-year extension of this period so that they have more flexibility in building and selling their developments according to market conditions.

On top of that, those who have decided they want out of the business can now resell the land or dispose of their interest in it before Jan 21 next year.

Foreign developers also received more leeway. Currently, they are required to sell all the units in their project within two years of completion and are not allowed to rent out any unsold units.

Now, they have been given two more years to dispose of the units, and can also rent out any unsold units for up to four years.

May also want to read:
99 Leasehold Property: Calculation of Depreciation Rate based on Singapore Land Authority Data
Spore Property History 1960-2008
Property Investment Tip: Don't put all your eggs in one basket
HDB Resale Price Index 1990-2008: Graph & Chart

7 comments:

Anonymous said...

I have been following your blog for a while and find your comments useful and mostly agree with them .

only would like to point out that everyone i talk to is bearish , other day the tea lady in my office was telling me not to buy any property.

Markets don't turn around due to sudden influx of buyer or seller , in fact it happens when there is exact opposite , that is when all who are bearish have sold and no one else to is left to sell , at that point even small number of buyers, who were always there , turn around the market .

I feel most of the bad news is discounted and this may be the time for first time "home" buyers to start looking for what they want, and prbly try to get the best deal possible for the place they like. meaning correct the market buy 5 -10% in price negotiations .

Don't see more downside after that , as most are bearish and sitting with cash , ready to pounce on any opportunity , and longer the prices hang around here , more will jump in, thinking that may be correction is done.

conclusion: start looking for a place if you are buying to live there , as you may be specific as to what you want . and negotiate. can't see too much downside to that , and if you horizon is like mine of 3-5 year.. think you will be safe.
if you are a investor, honestly don't know what to advise you ! all i can say is good luck trading.

just my 2 cents worth

Smart Buyer said...

No doubt property sale has dropped drastically n 2008 (80%? If I remember correctly) but price has not dropped much, has it? As an investor, I'd wait for the price to turn bearish, not the sale transaction. At current price, the ROI is practically negative and I'd be better off investing in other instruments. Besides, with the recession getting deeper and longer, I do see a lot more downside to come. In my view, what we are seeing now is likely to be only the tip of the iceberg.

just my 2 cents worth to add to yours.

phantasia said...

Hi Smartbuyer,

In general, are we able to give a rough timeline estimate on the property cycle? As in how many years between a peak and a bottom in the property cycle.

I'm not sure if its realistic to look at it this way, but for eg, the last economic downturn is in 1997 and the current one in 2008. That would give a very rough 10 year estimate on the economic cycle. Or is it even appropriate or sensible to look out for such patterns?

Thanks!

dream said...

Dear Smart Buyer,

I am fortunate enough to come across your blog which is probably the comprehensive blog on the property scene in Singapore.

I have since introduced a few others to your blog. We express the same appreciation for your insight and comments.

We are wondering if it is possible to invite you over to our "chat box" as we are very keen to interact with you "live".

Please let me know if I could arrange it at a time convenient to you.

Anonymous said...

It is of interest to read these postings. Thank you for setting up this blog.

Firstly, many property buyers are transacting in property because of the returns. This is driving the property prices to an unreasonable range. Have not we learnt our lessons enough from the 1997 and 2008 crises? Should we continue to drive up property prices hypothetically and be unnecessarily involved in this game of the cash rich?

Secondly, think carefully of the loan to be paid many years down the road. Many people are already worrying about the repayment. They are working extra hard to pay back the amount borrowed. Should any of them default on the loans, will there be another round of crisis? And, this time local crisis.

Thirdly, how long can the help from the budget last. As we are not able to tell when the crisis will end, should not we be more cautious with the purchase of property? Furthermore, should we be led around by those who wanted to earn cash fast and be dragged down by this game of the cash rich?

Lastly, we must really learn to be realistic. The salary or remuneration is being driven high because of the property prices and the cause of it, the underlying loan to be paid many years down the road. Such is the vicious cycle. Higher salary drives up business cost. Honestly, the increase in salary never generate productivity. Why is this happening? Businesses should be more cautious in this area and tie remuneration package to the returns obtained in the form of productivity, which can be measured.

Smart Buyer said...

Dear dream,
Thank you for your invitation to the chat box but I'm really busy kicking off a new business. I can hardly find time to attend to this blog, so I'm afraid I'll have to decline your invitation.

Best wishes to you and friends.

Smart Buyer said...

Dear Phantasia,
I don't think it's very meaningful to pay too much attention to the 10-year cycle. In my opinion, it may be more useful to follow the global economic situation as a gauge of the property trends.

Good luck to you!

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Dear visitors:
Your comments are most welcome!

The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

Smart Buyer :)