Viva, Thomson Road, Singapore, Singapore Property, Property, Real EstateEveryone has had time to absorb the news about the cooling measures by now, and developers have already started to respond. As expected, they have countered with a slew of discounts, from straight-up price discounts to rebates on stamp duties. All these in the name of maintaining buyer interest and sales volume in an market that might slow down.

In light of this, several consumers have voiced concerns that these marketing tactics dilute and undermine the impact of the cooling measures. Developers can thus “keep supporting the headline price (it could even be higher), even though the actual prices that end-buyers see, after rebates, are in fact lower than before”, as one reader to the Straits Times pointed out in a forum letter. He goes on to say: “For any set of measures to be truly effective, the authorities should be alert to any “creative” marketing and sales tactics that could potentially be adopted by the developers and sales staff”.

This however, ignores the very fact that somewhere along the revenue chain, someone had to pay the price of these cooling measures. The burden of the additional taxes and fees has transferred from end consumer to developer. This will have a ripple effect on the market in general, and property prices in particular.

At BLUTA, we feel that the cooling measures will still be effective, and it should be expected that developers respond in this manner. After all, in December 2011 when the first round of additional duties were announced, developers also offered up to 14% discounts on their properties for sale. With these measures in place, developers may not be so eager to drive bids up for land tenders, thus keeping land prices in check. Moreover, with buyers not having to fork out money for the additional fees and duties, it will reduce their temptation to jack prices up even further upon resale.

But the ripple effect goes even further than that. With developers offering such discounts, current owners looking to sell their units in the resale market will lose out, if they do not try and reduce the amount that buyers must pay. If current property owners insist on maintaining their prices with the cooling measures in place, we will have the strange situation where new units will be cheaper than resale units! This imbalance will definitely correct itself, in favour of the house buyer.

For now, we think that the market is headed in the right direction, and the worries about developer tactics are still premature. By normal expectations, this downward trend should snowball, with developers and resale unit sellers competing for buyers. With more new units appearing by 2016, as forecasted by Minister for National Development Khaw Boon Wan, both in private and public housing, buyers should be able to dictate prices better. As such, the intended effect of the cooling measures, which is downward pressure on housing prices and thus deflation of the bubble, will be achieved.

However, this is always dependent on market sentiment. If this unwarranted enthusiasm continues unabated, prices will keep bouyant no matter what. As long as there are people willing to throw good money at over-priced property, no amount of cooling measures will suffice. Such measures cannot educate an unsavvy market in valuing property. In such a case, it is not the developer tactics that we should be worrying about…

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  One Response to “Developers Counter Cooling Measures – Is It a Concern?”

  1.  

    About time the fat cats pay. No worries, despite the humongous profit the continue to reap, they will be scurrying to the authority for deferment and protections from the downside. Since the liberalization of HDB rulings and CPF utilizations, has anyone heard of any Singapore property developer losing money or go bankrupt? Zilch, none. But we have heard of property speculators and owners with negative equity and lose capital, no developer yet as far as we publicly know. I don’t know what is the profit margin now, in the 90′s, it was said that all they have to sell is 1/3 of the units and their costs are covered. With no pressure from the authority to sell-by-date, they can happily rent the unsold out or leave them empty till the next upswing. Such wonderful market powers vested by our skewed property market with too many vested interests from banks, etc …..
    In short, property development is a Boa-Zjai game in Singapore back by the lop-sided rules and the wonderful HDB PUT. Got capital, must play.

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