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Property Bubble ? or opportunity?
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lg_6273
Elite |
24-Dec-2006 22:17
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Property Bubble ? or opportunity? Alarm from some, but 1997 victims pray for a bit of ?crazy buying? for them to recoup losses. By Seah Chiang Nee Dec 24, 2006 AFTER years in the doldrums, Singapore?s high-end property has rocketed in recent months to levels reminiscent of the painful bubble a decade ago. But unlike that crash, for which many middle-class fingers were burnt, the current interest is selective and hasn?t touched many ordinary Singaporeans. It is confined mainly to the posh areas ? with some spillover ? that only the upper class and high achievers can afford, not the broad masses as happened 10 years ago. During that frenzy, thousands of ordinary people, ranging from workers to taxi drivers, teachers to housewives, would queue overnight during a launch to book units and sell them for an immediate profit. This time, there is much less froth, although many high-end launches were similarly snapped up within a short time and resold ? some repeatedly ? for a tidy gain. One of them, the 99-year Marina Bay Residences, hit a record S$2,000 a square foot, then $2,700, before reaching an unheard of $3,400 within months. The increased foreign buying ? from Indonesians, Malaysians, Indians and Koreans, etc ? is fuelling the market. They now make up nearly a quarter of the buyers, compared to 15% five years ago. Values for large multi-million dollar bungalows and posh condos at choice districts closer to the city centre have risen substantially, while the rest of Singapore is hardly affected. It is symptomatic of a global economy that benefits the rich and high achievers while the poorer class struggles for a living. The rest of the broad property market is largely neglected or dormant as it had been for years. In fact, the government HDB estate flats ? owned by 85% of Singaporeans ? remain weak following a decade of decline. This means that the boom ? if it can be called that ? is benefiting only a comparative few. Developers are hoping that what is happening is the start of something bigger. Some are betting that it will spread to the middle-class property within two years. With few private land banks, en bloc redevelopment of older estates in popular areas is rising. It reflects faith that Singapore?s property is rebounding on stronger fundamentals, looking forward to even better days after 2010 when the two planned casino resorts begin operation. Besides, the city?s 4.5 million population is likely to increase to some 7 million by 2030 with a large intake of foreigners. That would need a lot of homes. ?In Singapore, land is limited but demand will always grow as long as there is stability and prosperity,? one said, underlining the industry?s long-term belief. So, is it just a balloon forming, and who are the foreign buyers? Firstly, the market has taken such a bad beating for so long (down 35% to 40% since 1997) that the smart money is beginning to see values again. For the past two years, the economy has been rising by 8% annually; stock prices are today near a historical high. But the biggest reason is more wealthy expatriates living here. A small example: ?For sale? signs that once dotted the estate where I live have gradually disappeared, a sign of better times. More foreigners with families are renting homes here. My next-door neighbours are a French family (four teenage children), who moved in after an Italian couple was reposted to Hawaii. A Hong Kong couple moved in to the third house last month. Next is an elderly Briton with a local wife. Since January, some 17,000 private properties were sold in Singapore, with 23% ? or 3,900 units ? going to foreigners. Five years ago, foreign buyers numbered only 1,500 a year. ?Foreigners are making their presence felt in the property market here like never before, accounting for almost one in every four buyers of private homes here,? The Straits Times reported. Traditional buyers from Indonesia and Malaysia still predominate, but demand has been building up from ?other quarters ? notably India (in third place) and South Korea?, it added. More rich businessmen and money have been coming in to seek a stable, secure home. Singapore has always been a haven for ?hot? or investment money, and is gaining a name as Asia?s Switzerland. Foreign funds managed here now total US$200bil, having risen 20% a year for several years. One benefactor is Sentosa Cove, a 300-acre luxurious residential resort near Genting?s S$5bil planned casino. It offers amenities like two golf courses, a 200-berth marina and places for mega-yachts. When completed in 2010, it will have 10,000 residents ? 60% foreigners ? enjoying a rich Mediterranean lifestyle that one can be seen over cable TV?s ?Travel and Living? channel. All this wealth has a caveat, however. It may do little to narrow the rich-poor gap in Singapore, which is its biggest problem ? and may even widen it. For now, the boom is raising some fears of a repeat of 1997 when speculative money moved in, pushed up prices and moved out, leaving behind bankruptcies and falling assets. Appeals for the government ?to act now? to prevent another crisis have been turned down. ?There is no excessive speculation,? it said. It may be right. A strong partial rebound is not necessarily a bubble being formed. That will happen when citizens get involved en masse, buying and selling units many times in a few months. Many 1997 victims are, in fact, rooting for another speculative run. An owner of a S$800,000 condo, now worth S$480,000, looking to recoup his loss, said: ?It?s okay if the buying goes a bit crazy; the sooner, the better.? (This article was first published in The Sunday Star on Dec 24, 2006) |
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