OrangeTee & Tie CEO thinks cooling measures unlikely; weighs in on HDB 'lottery' effect
RESIDENTIAL property prices in Singapore will probably go on a stable and gradual uptrend, instead of "shooting up", due to a K-shaped economic recovery.
That's according to OrangeTee & Tie chief executive officer (CEO) Steven Tan, who does not expect the government to intervene in the real estate market and introduce cooling measures in the near future.
Mr Tan said in an interview with The Business Times (BT) that he foresees different parts of the Republic's economy recovering from the Covid-19 crisis at varying paces, with some sectors benefiting or rebounding more rapidly while others stay on a downward trajectory. Such a split resembles the letter "K".
"Singapore's success in handling the coronavirus pandemic has given foreign and local property investors a lot of confidence to invest here, and global tech and healthcare giants are also setting up offices in Singapore," he noted.
"With the work-from-home and home-based-study trends, many homeowners are also looking to upgrade to bigger properties."
Moreover, rock-bottom interest rates have made property investment more attractive. "Even a 2-3 per cent rental yield does not look too bad now, given the low interest rates," Mr Tan added.
A surge in upgraders is expected in the coming years as well, as more owners of new Housing & Development Board (HDB) flats complete their minimum occupation period (MOP) between 2020 and 2023 and will likely move to matured public housing estates or private residential properties, he said.
On the other hand, some owner-occupiers and tenants, including expatriates, are downgrading to smaller and more affordable housing due to employment woes and their industries suffering from Covid-19's blow.
All these factors will support housing transaction volumes and likely drive prices higher, according to Mr Tan. "But because the price uptrend should be steady, I don't think there will be cooling measures soon."
Most property consultants have forecast private home prices in 2021 to appreciate slightly more than in 2020. Those polled by BT generally expect a 0-4 per cent growth in the Urban Redevelopment Authority's benchmark overall private home price index this year. Some analysts also flagged that fresh cooling measures could be rolled out if developers start bidding aggressively for land.
As for the potential "lottery" effect for Housing & Development Board (HDB) resale flats in prime areas, Mr Tan suggested shorter leasehold tenures for such higher-end homes, to prevent speculative buying.
"Personally, I think a shorter lease could be a solution, instead of the usual 99 years, as subsequent buyers will not offer a very high price if the property has fewer years left," he said. "For first-time buyers, a 70-year lease will also mean they can still live in the same home in a prime area for the rest of their lives."
Other suggestions by analysts include a longer MOP, sell-back to HDB, and taxes or levies, BT wrote in December.
Separately, Mr Tan noted that OrangeTee & Tie - Singapore's third-largest real estate agency with about 4,100 agents - actively discourages and stops its agents from giving a cut of their commissions to potential buyers.
He added: "I think it's very hard to monitor and enforce but we keep reminding our agents, such as through frequent e-mails, not to engage in the practice, as it's an infringement of the Council for Estate Agencies' guidelines."
BT wrote last year that some property agents who receive high commissions from developers were boosting their chances of clinching sales by passing a chunk of their commissions to buyers indirectly to avoid detection. Agencies that do not allow their agents to indulge in this practice risk losing agents to rivals willing to turn a blind eye, BT reported.
