According to an internet survey
conducted by our Lianhe Zaobao, 70% of the 1,262 respondents said that it is
still not time for our government to ease off on property cooling measures.
40% of them even go as far as saying that such considerations should only be
made if property prices fall by at least another 20%.
In addition, 18% of the respondents felt
that more cooling measures should be imposed to curb rising private home
prices, as current measures seemed to have insignificant effects.
The Lianhe Zaobao survey seemed to suggest that a 20%
price drop is the "physiological barrier" for most respondents when
comes to easing of current cooling measures. Conversely, only 27% of those
who responded felt that the existing measures should be relaxed now.
The wife and I wonder if the survey
conducted is really an accurate reflection of the current sentiments on the ground. To be
fair, 1,200+ respondents is only a small proportion of those who read Lianhe
Zaobao (even for their online version). The figure is even smaller if you consider the number of existing/potential
participants in the private home market.
But let us assume that the "20%
price drop" is really what home buyers want before they deem it
necessary for the government to ease off on the cooling measures. We wonder if those respondents that made this call have considered the
repercussions of such a 20% drop carefully enough. One might ask at this juncture: if
private home prices will to drop by 20%, surely this is a good thing especially
for those who are waiting to enter the market. So what possible repercussions
are there?
The wife and I believe that those who
are waiting to enter the private home market largely fall under 3 broad groups:
The "Cash Rich"
They can jolly well enter the
market yesterday already if they choose to, but are remaining on the
sideline and waiting for the market to hit their "ideal" price before entering.
You be surprised how many of our HDB
dwellers actually belong to this group.
The "Risk Taker"
Those who have sold their property
earlier or are selling their existing property now (while the market is still lukewarm), and
betting that prices will fall drastically in the near future so that
they can re-enter the market again. Meantime, they will go on rental or move back
to live with their parents.
The "Upgraders"
Those who want to move from HDB to
private or a small private to a bigger private apartment, but need
to sell their existing homes before they
have enough cash to make the switch.
For the "Cash Rich" and
"Risk Taker", they will probably want cooling
measures to stay till the property market crashes, if possible. The bigger the price drop,
the better it is for them as it increases the potential upside in value of the
property that they eventually buy.
But for the "Upgraders", a
significant price drop in private home prices may not necessarily be a blessing.
History do indicate that when prices of new private home fall significantly, it
will bound to have a "knock on" effect on private resale and
eventually HDB resale prices. Although the degree of price drop in the three
housing sectors may not be proportional, the price gap that the
"Upgrader" group needs to bridge may still remain too wide for them
to upgrade. And to make things worse, they now find themselves in a double
whammy whereby their existing properties have fallen in value and also
become more difficult to sell in a bear market.
So depending on which group of potential
market entrant you belong to, a 20% drop in private home prices may not spell tragedy for developers alone...