By Andrew BattFeb 9, 2012
Andrew Batt is the Regional Group Editor for PropertyGuru. Previously, he was Publishing Director for Ensign Media, responsible for editorial matters for Property Report South East Asia magazine,...
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This is not a headline from today’s newspaper; it’s one that appeared in many media outlets in June 2011. Quoting several industry analysts, the story painted a tale of woe and pessimism for Singapore’s residential property sector. They were wrong.
Today there are similar headlines suggesting prices could fall anywhere between three percent and 15 percent in Singapore this year, and whilst most industry watchers will agree a minor correction is likely, it’s certainly not guaranteed.
The main question which isn’t easily answered is whether the Singapore government wants prices to drop. It is monitoring every snippet of information and will react without warning. Just as in Hong Kong, the government has the ability to change market sentiment and drive the market, adding gas when necessary and pressing hard on the brakes if the market is moving too fast.
While the Singapore government is pumping the brakes, the Hong Kong government recently relaxed some of its attempts to cool the market. Arguably they were too aggressive and were impacting the economy as a whole.
My view is Singapore’s government wouldn’t allow a major price correction. It could stimulate buying activity, but for every winner there is a loser and a significant number of people would be out of pocket. The spectre of banks coming to underwater property owners and asking for more capital is one I cannot imagine being allowed.
Of course I could be wrong, just as the analysts in June last year were wrong too.
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Reader Comments (16 comments)
Let's not forget while our govt is trying to step in with some control measures the investors, I mean the smart & prudent ones, are ever ready to jump in when there is window of opportunity. Nevertheless, there are many multi millionaires around our neighboring countries who are so desperate to buy our houses & there are shrewd business men who cast big nets bragging that the higher the price tags the better it sells leaching on the kiasu syndrome.
@ Teo: "There is never a good nor bad time to go into the market as like in stocks/funds investment." Please take a look at URA's property price index between 1996 - 2012. If you bought a property in 1996, you won't break even until 2010! That's a long holding period and lost opportunity cost. Property is at the peak of the cycle in Singapore, whereas it has fallen in the US by between 30 - 70% depending on location. In London, GBP400 - 500k buys you a freehold apartment just 10 minutes from Canary Wharf, no aircon ledge, no bay windows, balconies are free! It's the same as in the US. I'm not advocating we all buy in London and NY, but as an international investor, Singapore home owners are getting a bad deal from developers. Watertown at S$1300 PSF with a "Long Kang" view, rental yield 2 - 3%, leasehold vs an apartment overlooking the great River Thames and freehold some more at S$1,122 PSF, rental yield 5 - 6%? Let's have an international perspective. Where would you like to go if our region becomes unstable? the US is the top location for wealthy PRC to migrate to, followed by the UK. Singapore ranks 3rd.
Due to the high operation cost in S'pore many MNC's(Banks/Shipping/Oil & Gas/IT) are already relocating their offices to other countries in asia which are cheaper by more than half and deliver the same results, with the same time zone and cost effectiveness in this market why would any business man in the right sense keep his overheads high and stay in spore.
prices of properties in 1997 were comparable to those of 2009 when the market was picking up, on the high side. back then $$$ were stronger. look in between these years, tell me what you see of the prices.
Hm.. I believe our government will not want our economy to fail and would relax immigration policies where necessary to suit the economy condition. The same goes for housing.. These past 2yrs have generated a lot of upgrading, and property investments as singaporeans enjoy the fruits of a strong economic growth and currency. I do not think our govt will want citizens' labors to grow to naught by watching the market crash if it should happen.. In a long run (short and mid term ups and downs are difficult to control), I still believe in property. There is never a good nor bad time to go into the market as like in stocks/funds investment. Golden rule is whether u believe in the product, have confidence in it, and can afford it. Each person's beliefs and appetite for risk is different :) At least a property is something I can see and touch, rent out or stay in.
Most peoples have short memories and take thing for granted! Anything goes up must come down, price shall come down by at lease 20-25% simply because of demand and supply.
the government obviously wants the market to cool. Get real Mr Batt.
I noticed there is a drop in asking price in re-sale condos that I have paid attention to in the past few months...serious sellers started to low down the price but overall re-sale condos are still too expensive to afford,compared with new ECs, so Singaporeans prefer buying new ECs and the demand is very high for new EC.
In my opinion, the private property in Singapore will pass from a bad phase sooner rather then later and if you read the govt's steps, you can easily sense that govt is giving protection to citizens and PRs. a) Govt is lunching ECs on very attractive prices, so that citizen don't go in secondary market and burn their fingers, when the crash will come at least citizens will be protected. b) Launching more BTO which will reduce the COV crap eventually and HDBs will be affordable. Other factors are: 1) Employment is less now, and more banks are moving operations to other countries. 2) Bonus has been slashed in banks and pay is not increasing. The secondary market is completely dried up.
Totally agree with a lot of the comments here. The main problem is that a lot of the property oversupply are not really affordable homes. These are medium to high-end small condos which only the high-level expats could afford to rent. Most expats now come to Singapore on local or local+ contracts and are more likely to share larger condos or even rent HDBs!
While i agree there is too much liquidity in global markets.....there is a lot of risk too given the European situation and still fragile US growth story...so assuming these balance each other out, we should think the domestic situation is driving prices in Singapore (for a change). The domestic market is bearish for 2 reasons a. the governments stamp duty which for a foreigner looking to invest for s short period of time (say less than 2 years) would result in him paying 25% stamp duty (13% on purchase and 12% on selling). so this global liquidity cant easily come into Singapore. Even wealthy Singaporeans and PRs would have 2nd thoughts as stamp duty bites them too but to lesser degree. The govt seems determined to 'not allow' mkt to becme too hot so thats limits upside anyway. b. the supply of HDB and pvt homes in next 4 years is big. Even after satiating local demand we should have high vacancy rate of flats looking for tenants. given sluggish growth prospects (atleast his year).
These property portals are great in matching property buyers and sellers. However, I think when it comes to news reporting it is a joke. If you look at the articles posted here. Anything that says property prices will go up gets posted almost immediately whilst bad news are generally contained. As for Andrew's view - well i leave it up to the discerning readers to decide if he even knows what he is talking about. Anyone with half a brain and basic understanding of economics will know rental is the leading indicator of valutaions. No sane investor will put in any investment which is loss making. Properties are no different. Rental drops = Valutaions going down. And saying that US will keep rates low hence money flow will keep the property prices up in Singapore is childish at best. There is a concept called relative value. and singapore is not the only place on the planet where you can buy property...
It is in the interest of agents, agencies and home owners to talk up property. But remember what happened in 1998, 2000 - 2004. People talk as if property prices will either go up or stay stable, never fall. But remember how property prices almost collapsed in 1997. I fully agree with "Political's" comments. Going into 2013 / 14 / 15, around 30 - 50k of new homes, public and private will be completed. This comes at a time when Singapore's population will grow at around 100k per year. With around 3.5 people per household, the market will have appetite for 28,600 new homes per year. The oversupply will trigger a fall in rental value, which will in turn bring down prices of homes. In 2014, interest rates will start to rise, making home owners with mortgages even more highly stressed. Mortgage payment now account for around 30% of the average income of a household. If interest rates rises by just 2 percentage points, affordability will jump to 45 - 50%. Think about it!
Singapore's property price for 2012 is unlikely to drop for two reasons.First of all,low interest rate environment will be continued for at least in the next one to two years as U.S. Federal Reserve has already indicated it could not afford to raise interest rate this year due to the weak economy.Hence, this has generated liquidity for property investment in Asia.Second, the rapid expansion of Singapore's population in the last ten year has created greater demand and supply side need to do a lot of catch up.My reading is the property price for 2012 will stabilize and stay flat. They may be a likelihood of moderate increase of 1% to 3%.
The govt measures were actually designed to deter buyers for good reason. The supply is growing just as demand is being constrained through tougher immigration policies. This was what Singapore voted for just a few months ago. The govt has done a great job in preventing a financial crisis should prices drop 40% through tough financing restrictions. Supply is looking like its rapidly out running the forward balance. Of course there is pent up demand to consider, but a 150k unit expansion in supply (12%) in the next 4 years is likely to hurt a few buyers. Right now, only new developer units are selling because they circumvent the financing restrictions. Moreover, developers who know the market is likely turning are offering "attractive" discounts to move units as fast as possible and line up as many bookings ahead of what could be a very low demand period. The strong sales of new build properties is a very dangerous development and will hurt many people in the future.
"Is whether the Singapore government wants prices to drop" Andrew, Where have you been for last two years? You really think all the reader have no brine or can be misleading like this?