‘Tis the season to be jolly, but the property market is in the doldrums. For our Christmas special, The Edge Property polled stakeholders for their wishes that will, in their opinion, help improve the health of the property market. The open-ended poll invited participants to submit up to three wishes that are actionable and can be adopted as genuine feedback by the following groups: the government, developers, analysts, property agents and consumers. The participants could choose to have their responses aggregated and kept anonymous or grant permission to be quoted. The wishes have been collated, with the key themes presented below.
“I wish the government would be more in tune to the impact that some of the measures have on the livelihood of those in the real estate and related service industries, and recalibrate some of the measures to improve transaction volumes. The service industry has been hit hard because of the measures and transaction volume is as important to the market as the price component,” said Alan Cheong, head of research and consultancy at Savills Singapore.
Amid the clamour, an industry stakeholder, who opted to remain anonymous, wished for the cooling measures to remain and continue to rein in home prices, stating that “household debts have not come down to meaningful levels and interest rates have not risen to levels that will influence buyers’ decisions. According to the Department of Statistics’ household sector balance sheet data, the liabilities-to-assets ratio has been on an uptrend in recent years, rising from 15.1%in 1Q2011 to 16.7% in 3Q2015”. This respondent also wished that the government would reduce the upcoming government land sales supply to avoid a waste of resources on building units that would remain empty, as occupancy rates are expected to fall to a decade low.
Paul Ho, chief mortgage consultant at iCompareLoan, wished for the government “to coordinate a bureau where information such as car loan and credit card statements can be shared in a better manner”. “Buyers currently need to undergo onerous paperwork submission to check for total debt servicing ratio compliance. Alternatively, it could be made mandatory for financial service providers to provide monthly statements for bank financing purposes within three days of a client’s request. TDSR could be relaxed for people with high income or business owners to allow them greater flexibility in leveraging and access to funds to create employment,” he added.
Ryan Khoo, co-founder and director of Alpha Marketing, also wished for the government to work with the Malaysian government to explore out-of-the-box solutions that would address Singapore’s overly high property prices with Malaysia’s abundant land and benefit the citizens of both countries. He noted that “affordable housing is a large untapped segment in Malaysia and Iskandar is close enough for Singapore developers to operate in. This would be beneficial to Johor and Singapore in the long term, as it encourages more of the Malaysian workforce to live [in Iskandar] and commute to Singapore for work”.
Adrian Seow, investment director of Savills Singapore, wished that the government would “consider more favourably change-of-use proposals on select sites within strategic localities, such as the civic district and Tanjong Pagar, away from office use. This will make them more diverse and vibrant as places for work-live-play.”
Several respondents wished for developers to adjust their prices to stimulate demand and clear the unsold inventory. According to an academic, who wished to remain anonymous, this would also “prevent an upward price spiral and lower homeownership costs that have grown too high, too fast”. The same respondent also wished that developers would “build developments that are more liveable, sustainable and environmentally friendly. [This is] to show that we can have developers that look at the greater good of society while making sufficient profit”.
The wish was echoed by an analyst who hoped that developers would “start building homes that are meant for staying and not just for investment, which would help minimise a future mismatch of expectations between investors who are selling and buyers”.
With regard to the retail segment, the analyst hoped that the developers would spare a thought for the retailers who are struggling with high rental costs, as “we do not need another boring mall with the same old tenant mix that can cope with the high costs simply because they are big. We need to reinvent our retail malls to stay ahead of the competition among regional players or we are going to fall behind, and this would eventually hurt our economy”.
The analyst’s third wish for the developers was for them to “take more calculated risks overseas because Singapore should never be a safe haven where the government will always step into help businesses if they don’t thrive. We need more home-grown companies to venture out and away from the comfort zone”.
Tan Kok Keong, CEO of REMS Advisors, expressed a wish for developers to “explore alternative means of fundraising to manage the market downturn”, which would also open up investment options in alternative instruments and help investors diversify their portfolios.
Savills’ Cheong indicated his wish that developers would appoint marketing agencies not just based on agent headcount, as a large headcount does not necessarily translate into better sales than other strategies, such as diversifying with more agencies. He also hoped for developers to motivate agents in the current sluggish market by considering more generous commissions.
“I wish that analysts would provide novel research that opens up further insights into the real estate market. Current research is just based on analysis, such as demand and supply, which has not changed for decades,” said Cheong.
“Analysts should engage in more intellectual evaluation of the market to enrich the experience of readers and investors. They should also be more upfront about their forecast for the property market, much like equity analysts do for stocks, so that investors are able to gather a consensus view to guide their strategy,” said Tan of REMS Advisors.
A respondent, who opted to remain anonymous, wished analysts would “shed more light on the affordability of our homes from the finance perspective. This would benefit the market because we often think that a $1 million private home is affordable, but what about our quality of life after the 30-year mortgage? How much goes into that and interest payment, and what will be left for long-term investment, retirement, children’s education and other essential spending”? The respondent also wished for analysts to “highlight the oversupply situation in all segments of the market, as the government has not come to terms with the supply situation and developers are still taking risks by bidding up land prices and selling homes at unsustainable price levels”.
Separately, two respondents from academia expressed a wish for analysts to make reports and proprietary data and information more readily available to the masses, so that everyone can have access to the same information and the market will become more efficient. One academic wished for more analyst coverage on the impact of foreign exchange on the property market, to grow awareness of the global dynamics on property as an investment class.
Getty Goh, CEO of Ascendant Assets and CoAssets, hoped that analysts would “research on alternate forms of real estate investments, including real estate syndication and crowdfunding, as more people are investing in such alternative instruments and there is a growing demand for such research and analysis”.
“I wish that the analysts would assist buyers with tools for them to find their own bargain deals, so that eventually, buyers would be able to make their own decisions more independently of the market consensus and developers’ or agents’ marketing,” said Alpha Marketing’s Khoo.
“I wish that property agents would become better equipped with market knowledge because people rely on them to get their homes,” said REMS Advisors’ Tan. Billy Ong, senior associate district director of OrangeTee, also opined that agents should “fully adopt and embrace technology to increase productivity”.
An industry stakeholder, who chose to remain anonymous, wished that agents would “stop hopping to another agency just because it pays a little more of the licence or course fees, as they can really develop their careers by staying loyal to the firm that suits them best. The biggest might not always be the best. Additionally, agents should stay in the business if they are passionate about real estate because high turnovers during downturns do not help to grow professionalism. Some agencies should consider having paid agents for certain market segments to retain the best in the industry”.
Another respondent from academia emphasised the importance for agents to be knowledgeable “to be able to provide sound advice and explain all the pros and cons to their clients, instead of just rushing in for transactions. Maybe agents can offer goodwill discounts when transactions turn out to be simple and easy to build a better reputation”.
Goh of Ascendant Assets and CoAssets hoped that agents would “be able to give more holistic investment advice, so that consumers would be able to make more informed property investment decisions”. Alpha Marketing’s Khoo wished that agents would “be more like analysts, rather than just doing sales, as buyers will become more discerning and real estate agency is one industry where a significant portion can be automated or outsourced. This would also grow the skills of agents to help them value-add to clients”.
Savills’ Seow submitted a wish for “property agents to be recognised for outstanding professionalism, so that the market would know who to look for for their real estate needs”.
“I wish that consumers would be less susceptible to marketing gimmicks and focus on basic investment principles, and also realise that there are no guaranteed investments. This will reduce the chances of them getting into failed investments. They should also subscribe to the principle of ‘invest a little, diversify a lot’ to help mitigate the risks of a total loss and enjoy more sustainable returns on investment,” said REMS Advisors’ Tan.
His wishes were shared by an analyst respondent, who wished that consumers would “read credible reports and be informed about the market before making significant investments. Although property investment seems to have paid off for the early entrants, market dynamics can change and consumers should not be complacent and put all their eggs in one basket, thinking that property prices always rise. They should not become fixated on property investment and end up with more debts than they should have. Ultimately, high property prices will take a toll on future generations and only benefit the rich and landlords. For the sake of the future generations, property should not be the only investment option on most Singaporeans’ wish list, which seems to be the case now”.
A respondent from academia hoped that consumers would “look at other factors affecting the liveability, sustainability, environment and safety of a development, instead of focusing purely on prices, to encourage developers and the government to focus on these areas”.
Savills’ Cheong wished that consumers would “stop blindly talking about real estate prices coming off without checking the situation on the ground. Negative talk is infectious and sends a wrong message because people will return in strength and cause prices to escalate again, once they realise that prices are not falling sharply”.
“I wish that consumers would stay focused on monitoring the market for local and overseas opportunities. Bad times can be a good time to buy. Consumers should not shut off just because the market is weak,” added Khoo of Alpha Marketing.
This article appeared in The Edge Property Pullout, Issue 709 (December 28, 2015) of The Edge Singapore.