Tuesday, April 27, 2010

S'pore property market may be near peak

Increases in demand are pushing prices up, says economist

The rising prices seen in the local property market are unlikely to come down anytime soon, even though the market might be near its peak, said CIMB-GK economist Song Seng Wun at a panel discussion on Singapore's building and construction industry.

Speaking at the graduation ceremony of a three-month course for professionals in the building and construction industry at the Singapore Management University (SMU), Mr Song said that the low interest rate environment, combined with the view that property is an asset class that can be leveraged upon, may continue to keep prices up.

'And if you take the view that it doesn't look like (interest) rates are going to go up anytime soon this year - and even if rates go up it is going up in an environment where there is growth opportunity and growth momentum - any tightening at this point will be accompanied by strong growth,' he said.

Also pushing up prices are increases in demand from both local and foreign buyers, added Mr Song.

However, the market might be near its peak, if historical data is anything to go by.

The year-on-year increase at this juncture, said Mr Song, has hit 30 per cent.

'I notice that when we get to a point where property prices year-on-year start to reach the region of 30-40 per cent, it tends to signal the peak of the market over previous cycles, so we are nearly there in terms of year-on-year numbers,' said Mr Song.

The panel discussion - which included panellists such as Keppel Land group chief executive Kevin Wong, WingTai Asia's property director Chng Chee Beow and City Developments Ltd's deputy general manager for design and projects Anthony Chia - also touched on growth in Asia, with all the developers on the panel expressing an interest to expand within the region.

Keppel Land, for one, is looking to have 50 per cent of its earnings coming from overseas markets, said Mr Wong.

Keppel Land's earnings from overseas in FY2009 represented about 31 per cent of its attributable profit.

But venturing overseas is not easy, and to turn into a successful global entity, it is important to know the target market, said Mr Chia.

'There is very little shortcut to that and that's how tough it is in some of these foreign markets . . . it's all about culture, it's all about people and understanding the market.'

Source: Business Times, 27 Apr 2010

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