Cooling Measures a concern for Singapore Execs

Singapore Property

Though overall sentiment in the Singapore real estate sector strengthened in the third quarter of this year, fears over potential government interference in private residential properties continue to be rising.

That’s according to the results of the National University of Singapore Real Estate (NUS+RE) Real Estate Sentiment Index, which serves the Real Estate Department and the University Institute of Real Estate and Urban Studies.

Around 40-50 senior executives in the real estate sector who are closely watching the momentum in the markets were surveyed in the quarterly survey.

In the next six months, more respondents were nervous about government action to cool the residential property sector, with the proportion jumping from 5.8 percent in the second quarter to 19.2 percent in the third quarter.

NUS Graph

NUS+RE said in a press release on Thursday that this was the largest quarter-on – quarter rise in the new survey among the risk factors for sentiment.

In the other hand, the proportion of respondents who found the tightening of the debt market’s funding and availability to be a possible risk factor decreased to 38.5 percent in the next six months, from 46.2 percent in the previous period.

Nearly all those polled decided that work cuts and the economic downturn in Singapore and worldwide would be the top threats in the next six months that could make a dent in investor sentiment. These risk factors could put pressure on real estate prices and sales, some respondents said.

A higher proportion (76.9 percent in Q3) have viewed it as a possible risk factor with respect to high building costs, up from 69.2 percent in Q2.

Meanwhile, according to around two-thirds (63 percent) of the respondents, the latest clampdown on the re-issuance of buying options (OTPs) could only have a slight negative effect on new private home sales rates.

Approximately 85 percent of respondents have felt that the OTP ban will have a slight detrimental effect on new revenue amounts.

Most of those surveyed claimed that, relative to other consumers, HDB upgraders would be the most impacted by the OTP curb.

In September, after months of persuading private housing developers not to engage in the procedure, the authorities clamped down on the persistent re-issuance of OTPs upon expiry-which had essentially permitted purchasers to delay their sales and payments.

Nearly half of the property developers surveyed by NUS+RE foresee more residential units to come to the market in the next six months in terms of potential releases and purchases.

One respondent said: “Sales launch decisions are likely to intensify in the short term, since supplies from land sales transactions that took place two to three years earlier are expected to reach their respective deadlines.”

Another respondent stated that owing to the Covid-19 pandemic, there may be further releases since these had been postponed earlier.

That being said, no improvement in the number of units released was expected by some 28 percent of developers.

In the next six months, almost seven out of ten developers have assumed that the price of new residential releases will stick at current rate.

“One of them said:” Although certain developers will have to lower their rates in order to market their units in order to prevent incurring expenses, there are others that choose to sell their goods according to what they are worth, such as in high-end developments. The resulting net result is thus that prices are likely to remain at the same amount.

In the meanwhile, according to some six in 10 respondents, the work-from – home movement may only have a marginal impact on the expectations of prospective homebuyers for the qualities and characteristics of their houses.

Even, if tastes are to shift, 42-54 % of respondents noted that more private property purchasers are now likely to favor spaces that can be repurposed, or may like more rooms to encourage work-from – home arrangements.

The NUS+RE study showed that overall sentiment “significantly changed” in the real estate sector in the third quarter of this year as the number of new cases of coronavirus seemed to be under control.

The composite sentiment index of the survey, which is the derived proxy for current overall sentiment on the real estate industry, grew from 3.7 in the second quarter to 5.4 in the third quarter.

The last time the 5.0 mark was exceeded by this index was in Q2 2018. A score above 5.0 indicates that market conditions are increasing, while a score below that implies markets are worsening.

A new mood indicator monitoring shifts in sentiment over the past six months is also included in the study. In the current report, this rose to 5.3, from 3.1 in the previous quarter.

Meanwhile, the future sentiment indicator, which reveals shifts in sentiment over the next six months, has also risen to 5.4 in the term July-September, relative to 4.3 in the quarter April-June.

This rebound in consumer confidence has not, however, been broad-based. The outlook for the workplace, supermarket and hospitality industries has stayed subdued, while it has changed for the suburban residential market.

The new net balance of the prime residential sector was -14 percent , up from -65 percent in Q2, as fewer respondents in Q3 stated the state of the sector had worsened.

The industrial, logistics and suburban residential sectors posted positive current net balances of between 29% and 31%, respectively.

By comparison, for the year, the office, hotel and serviced apartment and prime retail sectors had negative scores of -63% to -69%. Ses three industries remained adversely impacted in the aftermath of the Covid-19 pandemic by safe-distancing steps and travel restrictions.

Also, most of the property developers surveyed were still wary considering the improvement in overall sentiment, as the external climate remained “extremely unpredictable,” said Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Solutions.

And on the other end of the continuum, because of the shortage of government land purchases, a majority of respondents were worried about the dwindling availability of real estate in the future, Dr Lee said.

 

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