Seah Chiang Nee
Some 10,000 homes have changed hands so far this year in a frenzy that began in June as people hitch a ride into the future in this land-scarce city state.
LAST month was one of those times when my personal story became enmeshed with a wider phenomenon of today’s Singapore.
I am referring to the buying frenzy that has swept across the property market even as the economy remains in crisis, prompting a worried government to intervene to cool it.
As I was pondering over why so many Singaporeans, who were still facing a job crunch, were rushing to buy properties, I received an unexpected telephone call.
It was from a real estate agent who made an offer to buy my home in suburban Singapore for the last 22 years for a professional wanting to redevelop for his family. His was a case of pent-up buying which was put back because of recession.
The 50-year-old property was valued at seven-and-a-half times what it cost me in 1987, another crisis year.
It was by no means a unique deal. Property remains one of the best long-term investments in Singapore. From viewing to signing, the sale was done in only one-and-a-half days.
I was told there had been quite a number of chequebook-in-hand purchases.
In the days that followed, I had a busy time turning away other offers. Elsewhere, crowds thronged new property launches or made a beeline for resale homes like mine.
When I was house-hunting last Sunday, I encountered a little of the frenzy.
In one house (offered for S$1.25m (RM3.1mil)) which was situated near a train station, I saw several families taking turns to view it. As I left, another group was waiting to go in. Days later it was sold.
The traditional Chinese fear of the Ghost Festival month was no deterrence.
This inexplicable demand which began in June has driven up prices to levels that analysts believe are unsustainable before the year with the government determined to stop it get out of hand.
So far this year, some 10,000 new private homes have been sold, compared with 4,300 in the whole of 2008.
This obsession for property among Singaporeans, which has created many individual fortunes, is based on a strong fundamental.
The supply of land cannot be increased beyond some small reclamation, while the demand for it will increase as long as Singapore flourishes.
“Over the long term, anyone who has a plot of land will be sitting on a gold mine,” said a real estate executive. (Foreigners cannot buy landed property here unless with special approval, but many investors from Indonesia, Malaysia and Hong Kong who have bought apartments have profited.)
“Tokyo’s Ginza today costs US$15,000 (RM52,000) per sq ft. This could be a reality in Singapore if there’s continued stability and growth,” he added.
However, not all Singaporeans hold long-term views. Speculation remains strong despite the poor economy, with people frequently buying and selling properties for a quick profit.
Short-term investors are helped by low interest rates and friendly payment terms offered by developers that allow them to “churn” or “flip” them for small quick profits.
Others “upgrade” into bigger properties or “downgrade” them because of changing financial circumstances or retirement.
The proportion of citizens buying property here every year is – in normal times – among the highest in the world on a per capita basis. The recent recession put a dampener on the practice.
Several years ago, a report said that during the preceding 10 years, more than half (or 52.2%) of Singapore’s total households had changed residence.
Some 62% of people moved to bigger homes, while 18.4% shifted to smaller places. These ratios would now likely have changed because of the recent recession.
Statistics have shown that young-er households and higher-income households have a higher propensity to move to bigger houses.
In recent times, when Singapore experienced a severe downturn with more business failures and jobs being shed, there had been an increase in the number of down-graders.
This sub-community of down-graders of which I have just become a member is set to rise as the number of retirees keeps rising.
Singapore is one of the most expensive cities in Asia to retire in, and some elderly without sufficient savings often downgrade to be able to afford a middle class life.
In the New Singapore, an additional factor has appeared that partly explains the property rush: The massive influx of foreigners.
Singaporeans predict an eventual population of 6 million to 7 million people.
“Think of the number of new homes needed!” exclaimed a businessman, who has accumulated several landed properties in the northeast.
“People are hitching a ride into the future that could come in 20 years’ time,” he added.
In 1987 when I bought my house, the population was 2.77 million; today it is 4.84 million – a 75% increase. Few countries in the world undergo such rapid rises.
Wealth has risen even more. Singapore’s gross domestic product (GDP) per person is now US$53,200 (RM185,500) – a four-fold rise from the US$12,560 (RM43,793) some two decades ago.
Under such circumstances, a 750% rise in the price of a property is not extraordinary.
In the next few years, the speculative fervour is likely to cool following last week’s measures to prevent an asset bubble. This includes the release of more land for housing.
The government is caught be-tween two unpalatables. One is a sharp market collapse that will hit 80% of the population which own their homes.
The other is prices moving beyond the dream of the new generation to own a home.