Property News & Market Trends

Where have the buyers gone?

It's really mystifying. In the first week of July, a 3cm display ad in ST Classifieds would get hordes of enquiries. In fact, we recorded more than 50 calls for 8 projects we placed out. You can feel the adrenlain flowing. If you're a seller or an agent, you'll feel esctatic. You may change your mind selling at the current price. So, you decide to increase your price since they are so many enquiries, you thought.

Then comes the shock therapy. On the 2nd week, responses fell by a whopping 70%! Incredible. For a moment, many agents would have thought their cell phones aren't working! The 3rd week was worst than ever.  Our record showed 5 calls for 2 of the more popular projects. The rest went silent. Nothing. Zip. Makes me wonder.

The fourth week continued to slide. Enquiries became a rare luxury. What's happening? Mind you, this is before the sub-prime massacre occurred. After speaking to more than 20 people directly involved in selling, buying and the agents, there is a hint of what really happened.

Reason #1 - Duplicated buyers. Just a simple scenario. In a weekend, it's easy to find 200 agents selling The Sail. An experience agent estimated that the real figure of sellers could be about 60. Many agents are selling for the same unit, of course, without realising it. Imagine the excitement of the sellers when 5 agents came back with buyers' enquiries. The unfortunate fact is, there aren't 5 buyers. They are probably the same buyer calling the 5 agents. This is a hype-up situation that nobody can put a finger on unless the seller really sells and the buyers turn up. Usually, nothing happens, as the sellers will happily raise their prices on the false assumption of the "multitude" of enthusiastic buyers.

Reason #2 - Option-flipping. It's a speculators' haven. They gambled on putting down a 1% option and quickly look for another option-flipper to take over before the exercise date. Some are satisfied with just a $30psf increase, some hold out for as high as $200psf, depending on the price range. Normally it'll be a 5-10% margin. The good thing is - they don't need to pay for any stamp fees. It's just paper trading. With spikes hitting an increase of 12 - 20% in developers' prices, option-flipping became a no-brainer. Some trade with as many as 15 options at any one time, some just try out a couple. Profits can range from $30k - $200k in less than 4 weeks, less agent's commission.

The continuous spike and ridiculous price increases are like a double-edged sword. On one hand, speculators made fast money, on the other, they are worried about government intervention. That would bring the speculation to an immediate crash. By the last week of July, the market is flooded with loads of options going for only $10,000. Takers became scarce.

On 3 July, I reported on the Government's concern and the "monitoring closely" statement. Despite of the government's non invention on speculation, option-flippers are worried. They started clearing. Speculators stayed away. This brought the options-flipping almost to a standstill by August. Those who came in later got their 1% burnt. Many are agents-turned-option traders. The money is too good to pass up.

The sub-prime woes added to the standoff. As of August, only genuine buyers/investors bought new projects, though some inexperience speculators are still involved. To a certain extent, this temporary breather is a life-saver. It drives aggressive speculators away and brought sellers' prices to a more realistic level. When the ghost month is over, market will start to pick up again. Speculators will come in to test market again.

Due to the slow down in speculation, the 3rd Quarter will show moderate price increase. This will prompt the Government to hold back whatever measures they may have planned. The price will be driven up again all the way till the end of the year.

If the sub-prime woes do not hit Singapore shores, speculators will take the lead again. Let's watch the events unfold. - Danny 'Bingo'

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