Just as pent-up demand saw housing prices shoot up over the past few years, a reverse situation could be at play now, says Wing Tai chairman Cheng Wai Keung.
People are bringing forward their decision to buy property as they fear prices may rise. As a result, demand in subsequent years may be lower than what is projected based on current demand. This could worsen an oversupply situation. "On top of that if the economy is not so good at that time, it will compound the problem," says Mr Cheng in an interview.
He attributes this to a cocktail of past undersupply, Singapore's population growth and liquidity.
"In 2003, 2004, 2005, when the economy was not so good, only people who really needed property would go out and buy.”
"Now, it's the reverse. Because of liquidity, people feel more secure, and even though the government continues to say that the economy is not doing well, apparently Singaporeans are still confident in general. Now some people may be bringing forward their buying (decision), thinking: 'I'd better buy now because prices are going up'.
"But my argument is that there is a danger of people bringing forward their demand, so subsequent years' demand may be lower than what they call average demand every year (based on current demand statistics).
"This will create an even bigger supply and demand inequilibrium; it will create an oversupply more than we think."
Analysts have also attributed strong property demand since 2009 to investors' distrust of financial instruments following Lehman's collapse. Strong liquidity and low interest rates and the onset of inflation have made property investment all the more alluring.
In addition, developers have also taken to minting small apartments to keep lumpsum investment size affordable, to draw a wider buying catchment.
Mr Cheng says that he understood the government's measures to cool the property market but has a suggestion. "Government policies, especially tactical policies, must have a sunset clause because they are enacted to deal with certain dislocation of market forces.
Source: Business Times – 7 June 2012