Wednesday, February 8, 2012

Developers may have sold 1,700-1,800 private homes in January 2012

In January 2012, just a month after new property cooling measures were introduced, Singapore property developers may have sold 1700 – 1800 units excluding the highly popular Executive Condominiums.  “I think many of us in the market are surprised by the strong sales in January,” said DTZ’s Southeast Asia chief operating officer, Ong Choon Fah. But she added that last month’s strong numbers came mainly from Watertown and The Hillier. Their attractive locations next to MRT stations and strategic marketing by their developer were key factors for their popularity. Both projects are part of retail-residential mixed developments.[1]

The editor of iproperty blog asks: “Sales is back up with the number of new property launches last month, but how long more will this be sustained? Will demand eventually wind down and how soon could that be expected?”

The demand will eventually wind down when the only supporter of the property prices winds down: a large positive monthly cash flow of monthly rental yield minus monthly mortgage payments.  Since this will not reverse until central banks of the large countries such as European Union, USA and China stop printing money (pay attention to the fact that European Central Bank has decided to pump more money into European debt fire and stock and started to climb after a sharp fall since USA Quantitative Easing 2 ended). Since that does not seem to happen soon, I do not think the party will be over soon, if a European debt crisis do not suck liquidity out of Asia. We can take clue from China and Hong Kong. No government cooling measures or market conditions could work there against runaway property prices but just increasing the interest rates and decreasing the liquidity by bank cash holding increase have immediately impacted the property market.

As long as this positive cash flow stays, I do not think the party will end. Giving investors prolonged ultra-low interest rates and expecting them to make sound decisions is like giving drivers alcohol and then expecting them to drive well.

No comments:

Post a Comment