Char Siew with Sushi?

(for MediaCorp 938LIVE’s Money Talks on 5 July 2007)

We seem to have gone back more than ten years. People are now rushing for some million dollar properties like Apple fans rush for the new iPhones. Almost every week, property prices, especially those in the prime areas, hit new benchmarks. Since January 2006, prices in some areas have jumped more than one hundred percent.

At more than $5,000 psf today, Singapore is now one step closer to the $9,000 psf level found in fashionable areas in London. If, like me, your head is itching, it’s perfectly alright to scratch it and ask: How long can this go on?

Surely, just because Singapore’s property market has recently recovered, cannot mean that it can go on rising at this rapid rate, till the end of its mythical 10-year cycle. In some ways the Singapore property market today, at least in the prime areas, resembles a drunk at a pub in Clarke Quay.

With every drink he gulps, people think he must soon collapse. But he does not. He keeps on drinking. To everyone’s amazement, he remains standing late into the night. Eventually, onlookers decide that they were wrong to think that he would collapse. Then, just as they turn their attention away, the drunk takes his last margarita and finally crashes onto the floor, his two feet briefly popping up in the air.

That is what normally happens at the end of a property bubble. The question is which part of the property bubble are we now in? In the first place, are we in one? What if we are not in a bubble? In other words, the high prices are sustainable because as a new Global City, more of the world’s rich wants a piece of Singapore. In economics jargon, we say that there has been a shift in Singapore’s property fundamentals.

It’s like the demand for tuna that we use for our sushi and sashimi. For a long time, Japan consumes more than three-quarters of the world’s annual catch of tuna. But with globalization, non-Japanese have also acquired the taste for sushi and sashimi. So basically, the fundamentals of demand for tuna have changed.

Prices reflect this growing appetite for tuna. Since the beginning of last year, the average price of the best tuna caught has risen more than 30 percent, to $19 a pound. And this is not due to any substantial drop in the global supply.

This issue of rising tuna prices will not go away. At least, prices are unlikely to fall unless the world decides not to eat tuna. This has triggered a sort of panic among Japanese chefs. They are now looking for new and cheaper meats to go with their sushi. In Japan, they are trying out deer meat. In Singapore, perhaps we could soon get a slice of char-siew in our sushi.

Let’s come back to Singapore property. If we are indeed experiencing a bubble, it may be the correct approach to wait till prices come back down before buying in. But if this is not a bubble, or even the start of one, then in a few years’ time, we would only be able to afford properties in Jurong and Woodlands.

At least we have one consolation. In future, the char-siew sushi that we buy from Orchard Road won’t go off easily, unlike raw fish, at the end of our long journeys back home.