Property sector sentiment down, but underlying demand still exists

The real estate industry’s business sentiment plunged after the latest round of property cooling measures, but the outlook of the services sector continued to hold firm even as manufacturing optimism waned.

These findings came from separate quarterly reports released on Tuesday by the Economic Development Board and the Department of Statistics, which looked at business expectations for the second half of the year.

For firms in the services sector, a net weighted balance of 9 per cent expect more favourable business conditions, up marginally from the 8 per cent recorded in the previous survey.

The net weighted balance is the difference between the proportion of optimistic and pessimistic firms.

Real estate was the only industry within the services sector where firms felt that business conditions for the rest of the year would be less favourable, with a net weighted balance of -13 per cent compared to 9 per cent a quarter ago.

In particular, real estate developers expect the recent property cooling measures including the Additional Buyer’s Stamp Duty and Loan-to-Value limits to have a negative impact on the property market.

But economists told The Business Times that the dive in the business outlook among real estate players is not something to be worried about at this juncture.

Mizuho Bank economist Vishnu Varathan said: “I think the sentiments just reflect the abruptness and the unexpected timing of the cooling measures, but already we can see how quickly the market is adjusting.”

For example, property showrooms still continue to draw interest from buyers as developers offer discounts, he said. “At the end of the day, the underlying demand is still there.”

Adapted from: The Business Times, 1 August 2018