Daily Lessons from Life 13 February 2013 - New private home discounts not cause of dip in resale prices: analyst

Tomorrow is the verdict for Mr Ng Boon Gay, ex-Head of Singapore Anti-Narcotic Bureau. Many people will be watching this as some speculated that CPIB may lose this case. If so, it is a big deal!

" New private home discounts not cause of dip in resale prices: analyst - CNA 13 February 2013

SINGAPORE: Prices of new private home launches usually set the benchmark for resale properties in the area. But it seems that discounts offered by developers of major properties in the city since the fourth quarter of last year may not have spoilt the market yet.

Buyers who bought units at D'Leedon near Farrer Road and Interlace at Alexandra Road in the fourth quarter last year could have enjoyed discounts of up to 15 per cent.

But analysts believe these recent deal sweeteners were not the main culprits behind the slight dip in resale prices in the city or core central region, in January.

According to figures compiled from the Singapore Real Estate Exchange, January's resale private property prices in the city dipped 2.9 per cent on-month to an average of S$1,878 per square foot.

The seventh round of cooling measures were cited for dampening buying sentiment after experts observed a slight recovery in the beginning of the fourth quarter of 2012.

From January 12, foreign buyers, which make up a third of buyers of homes in the city, will have to pay 15 per cent in additional buyers' stamp duty (ABSD).

It is five percentage points more than what was initially imposed in December 2011.

Steven Tan, managing director at OrangeTee said: "I don't think the decline of prices in the CCR is due to the recent discount given by some of the developers. I think it is due to the effect of the latest cooling measures. As you know the segment depends on foreign investors and local investors. So this is the area that the cooling measures will affect the most."

Experts added that properties in the city are varied, and cater to different types of buyers.

Alan Cheong, research head at Savills Singapore said: "So those who buy prime (units) in Ardmore Park - they are probably of a different market from that in D'Leedon. I don't think they are overlapping. Perhaps the older apartments - freehold apartments - those going out for S$1,400, S$1,500, may be interfered with by D'Leedon."

Some analysts said buyers eyeing a resale unit in the city could use discounts offered by new private homes as a bargaining chip.

In the meantime, with units still available in projects such as D'Leedon and Interlace, there are plenty of choices for bargain hunters looking to buy a home in the city."

Personally this is NOT the MARKET most Singaporeans are concerned and worried about. Especially the upcoming young couple who are in the job market for about 3-5 years and trying/wanting to raise a 3-kid family as exhorted by the government.

Lessons for me are:

1. private property prices SHOULD be allowed MAXIMUM freedom. Many Economics Nobel Prize Winners observed that the notion that: "property is the best investment as it can only goes up in prices" is the ROOT cause of many a bubble. The most recent piece was by Paul Samuelson that I read in the Business Times today. When it bursts, and it will if it is a bubble, many innocent people will be dragged down with it besides the foolhardy folks who believed in this notion while only less than 10% of the players, the SMART ones, will benefit as they get out just in time or earlier;

2. the CONNECTION between Public Housing Owners using  the resale proceed of their public housing to help them UPGRADE to private housing should be delinked as Public Housing SHOULD be for ordinary Singaporeans who want to put a roof over their heads while raising a 3-kid family without having to toil all their remaining life till to pay off the mortgage. If resale public housing prices can make up a large part of the downpayment of the private housing, it also means, the 1st time public housing price will go up too since the claims, despite Minister Khaw's assertion to the contrary, that 1st time public housing price is NOT solely dependent on the Resale Public Housing prices! There is a win-loss situation here between the New 1st Time Buyer and the Existing Owner of Publich Housing. You tweak the laws to favour one, the other will lose. A dilemma that the government should avoid getting itself into!;

3. the heresy I am suggesting is: a. to have a distinctly separate 1st Time Public Housing Market starting from today, let's say; and b. the existing Public Housing Market; and c. the Private Housing Market. Let category b and c be totally driven by Private 'Free' Market forces. Willing buyers want to pay exorbitant prices, let them do it! While for the category a '1st Time Public Housing', buy from the government at a National Affordability Price and can only sell back to the government when the owners feel that they can afford a Resale Public Housing or a Private Housing.

This take care of ONE of the biggest purchase obligation of Singaporeans who are starting a 3-kid family who are willing to live in a 1st Time Public Housing.

The Existing Public Housing market will sort itself out eventually.

A gentle reminder to all owners of leasehold housing - public or private - that the land will return to the government when the lease expired! Extension of lease will be subject to new terms and conditions that may or may not be favourable or affordable to the owners who want to renew the lease.