By Khalil AdisFeb 7, 2011
Khalil Adis is an experienced property writer, with in-depth knowledge of Singapore's and Malaysia's property market. During his career, he's written for Property Guru, Property Report and Property...
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The overall prices of private residential properties increased by 2.7 percent in the fourth quarter of 2010, slower than then 2.9 percent increase in the previous quarter.
Prices of non-landed properties in Core Central Region (CCR) increased the most in the fourth quarter at 2.2 percent followed by those in the Outside Central Region (OCR) and Rest of Central Region (RCR) at 1.9 percent and 2.1 percent respectively.
For the whole of 2010, prices had increased by 17.6 percent, compared with the 1.8 percent rise in 2009.
In the public housing market, the prices of HDB resale flats rose by 2.5 percent in the fourth quarter, the lowest quarterly growth for the year.
Meanwhile, the median cash-over-valuation (COV) fell S$7,000 to S$23,000.
While the cooling measures appeared to have had an impact on the HDB market via the fall in COV, the private property market is still showing signs of exuberance.
According to PropNex, private home sales in December 2010 recorded 1,699 transactions, - the highest number of transactions in December for the last few years and the fourth highest monthly sales for 2010.
Therefore, the latest cooling measures announced on 13 January are specifically aimed at the private property market.
However, the swiftness of how the policy was implemented was rather shocking – it was enforced the very next day.
Market watchers that I have interviewed say while they support the government’s policy, they opined that it no longer has foresight.
Our government has always been known to plan ahead and anticipate problems.
By implementing a policy without giving the public time to adapt and understand it, it shows an unsteady leadership and appears to be a knee-jerk reaction.
There is a glimmer of hope though – the new property curbs would favour rich local and foreign investors as they face less competition from Singaporeans who now have to come up with more cash upfront.
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Reader Comments (10 comments)
The best is to limit the numbers of property you can purchase. It is a necessaity for most to own one, even private housing should be regulated.
i share the same sentiments as "PricedoutoftheMkt...fornow". In fact, these are the type of comments and analysis that people should expect from analysts, journalists, media, govt representatives, and so called experts. Come out with examples on leverage, and how a change in interest rates affect mortgage repayments. Stop using average or median numbers, and complex formulas. Use lower, median and upper range to make it easy for people to understand whatever numbers and their impact. Provide not only percentage, but also absolute numbers to suppport the persentage. Another thing is i dont really understand how inflation is in single digit when property index has gone up by double digit in 2010. Anybody here can enlightened me?
My opinion is that regardless of what the government has done, is doing and will do in the near future, prices will stay elevated. The reason is simply because of the abundent liquidity offered by Global central banks, landing in the hands of "investors" seeking higher returns and finding it in Asian equities/ property mkt. In fact,with each measure failing to cool the mkt, the govt will be forced to implement, not just more, but also increasingly stringent and draconian measures to rein in price escalations. However,prices will continue to stay elevated, for the following ADDITIONAL reasons: (1)It is still relatively easy to get a loan from a bank due to the liquidity that Global Central Banks are providing in the hope of triggering a recovery in their own country/ preventing a crisis. (2)Rental yields of newer condos in Singapore are still yielding 2%-3% returns a year compared to property loans that are only 1+% (for the first 2yrs). Property prices will only finally fall when the US raises interest rates. If you follow Global economic developments,you realise that Asian Central Bankers are probably having one of the worst times of their lives! Why? Because, while inflation is rising unabated, they are cautious about raising interest rates to fight it because doing so will attract even more hot money flows and worsen the situation. Not hiking interest rates has a similar impact, so its a do or die, don't do ALSO DIE situation. For singapore, the MAS does not manage interest rates, it manages the SGD exchange rate. That is why the SGD will likely continue to strengthen as that is needed to help offset some of the inflation caused by rising import costs. Also, if you notice, SG interest rates moves in tanderm with US interest rates, so the moment US interest rates rise - which I suspect could be in the next 12-24mths time - SG interest rates will also start to rise. Current SG property loan rates are abt 2% below the long-term average. For every 30yr loan, a 1% increase in rates translates roughly to a 30% increase in monthly mortgage repayments. A SGD 1mio, 30yr mortgage loan now requires a monthly repayment of abt SGD 3,300/mth. A 30% increase will set a landlord back by SGD SG 990/mth. Back at the longer-term avg which is 2% higher, mortgage repayments per SGD1mio outstanding will rise SGD1,980/mth. Recall also that since rental yields are below 3%, if mortgage interests move back towards the longer-term average of 3%+, landlords actually start losing money even if their property is rented out. Will property prices crash? I think so, especially if you consider that during 4Q08 - 1Q09, SG property index fell approx. 30% until the govt came in to support the mkt. Now with the govt in the reverse cycle, having put on and still putting on more stringent measures to curb price rises, if SELLERs suddenly rush for the exit all at once, prices will likely fall more than what we have experienced previously since it makes Buying more difficult and reversing the various restrictions will take time.
Another thing is if the measures are not implement on the very next day, can you imagine what everyone will react and do during the window period (from 14Jan2011 to 31Jan2011...for example, the implemented date is 1Feb2011? There will be lots of buying and selling, and people are rushing to push through the deals before deadline!!
The measures are good for the property market, economy and banking system, as a whole. I disagree with writer's last paragraph. Whether there are measures or no measures, it does not affect people who have cash unless you dont allow them to buy numerous units. When there is a downturn, they wont be affected since they have paid up fully. But people who leverage, will be affected, if their income is being hit. That's why its important that the measures are aimed at such people; its really to protect them!!
You call favouring the rich local and foreign investors as GLIMMER of HOPE? What twisted logic is this?
the government announced the new measures at at time when the public has not yet absorbed the previous measures.
yeah. the measures announced by the government really took the public by surprise..!
An important fact is however omitted - first time home buyers are still entitled to 80% LVR therefore it is not true that more cash is needed upfront. The latest round of measures is to further curb speculation and not to prevent first time home buyers from purchasing their homes. In fact, with the expected drop in prices or at most a stagnation of prices, it will benefit the first time home buyers.
This is rather unfair to locals who wish to purchase a home in their own country. Maybe the government should come with a system to differentiate between locals, PRs and foreigners.