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There has been a steep recovery for property prices in the past few months. Looking ahead, investors are faced with two questions: what can be expected of the property market in the next six months and what does it mean for them?
According to our in-house indicators, the Ascendant Assets Correlation Indicator, we believe that property prices will continue to increase, but only in moderation. The sustained increase in property prices can be attributed to several factors, one of which is the general positive outlook on the economy in Singapore and in Asia. Singapore’s economy grew a robust 15.5 percent on a year-on-year basis in Q1 2010; meanwhile the Ministry of Trade and Industry (MTI) projects a healthy 7 percent to 9 percent GDP growth in 2010. These indicators point toward an economy on the up-swing and possibly better job prospects, thus fuelling demand in the property market. In fact, according to URA, the volume of transaction for private homes increased 25 percent in April from March to 2207 units. Also, a recent poll by PropertyGuru shows that 70 percent of potential homebuyers will purchase a property in the next 24 months, evidence that homebuyers’ demand for property can still be sustained for the next two quarters.
Another factor contributing to the sustained increase in property prices is the recent opening of the two Integrated Resorts (IRs), Resorts World Sentosa and Marina Bay Sands, which casts a spotlight on Singapore and serves as a catalyst in attracting potential global investors to Singapore’s property market. It is hopeful that these investors are suitably impressed with Singapore’s sound infrastructure and political stability and want to invest here, hence fuelling demand for luxury residential and commercial projects and pushing up property prices.
However, one should note that this sustained property price increase will only occur in moderation due to several downside factors, one of which is the Eurozone Greek debt crisis. Given the uncertainty faced by the European economy and its domino effects on the global economy (and subsequently the Singapore economy), investor confidence might be rattled. Doubts cast on job stability could force investors to reconsider purchasing a property, easing demand on property and dampening any excessive price increase.
Another factor that might impede exuberant growth of property prices is the anti-speculative measures introduced by the government in September 2009 and February 2010 to prevent the property market from over-heating. These measures have since gained traction and serve to stem excessive growth of property prices.
To conclude, property prices have been on the rise and we believe that it will continue to be, albeit in moderation, due to an uncertain global economic outlook attributed to the Eurozone Greek debt crisis and anti-speculative measures implemented by the Singapore government. Going forward, we feel that a conservative stance should be adopted and investors should tread with caution because the spectacular capital appreciation experienced in late 2009 would unlikely repeat itself as we move into the second half of 2010.
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Reader Comments (10 comments)
1. What is the Ascendant Assets Correlation Indicator formulated? Something like the US Housing Starts? Perhaps the Case Schilling Index? 2. IRs? How long more do we keep singing this tune? The IRs, F1s, YOG, New Singapore, etc... Ask yourself, did these stave off the 2007 bubble bust? 3. It has already been proven, our housing prices has outstripped our wages. Long term sustainablity is a big question mark. 4. When people claim "they see demand rising", the fact that we are putting our chips on the IRs shows that our manufacturing sector is sunset. 5. How to you quantify "investors' confidence"? FDI? Up or down? 6. Singapore properties has more upside compared to HK? HK has China hinterland, resources, people, etc. HK has thriving financial industry. In the same vein, why not compare Singapore to New York? London? Ang Mo Kio 800 sqf condo going for $2 million? $5 million? The only reason property prices are bubbling is money (both local and hot)has no where to go except fixed assets. US carry trade. US and Euro housing prices has yet to stabilise and money is flowing out and into Asia. China, HK, Korea, Singapore, all are facing price spikes. Don't use fundamental garbage to pass off as fundamental analysis. US interest rates probably won't come down for a while, so the local prices will probably stabilise for a while, but when US interest rates start to rise.... What say you Mr Bernanke.
Your quote "Also, a recent poll by PropertyGuru shows that 70 percent of potential homebuyers will purchase a property in the next 24 months, evidence that homebuyers’ demand for property can still be sustained for the next two quarters." shows a lack of thought through. Anyone who understand statistic will question the validity of a survey done at the site of a property seminar. The findings are bound to be skewed. In fact, property guru did not even publish my earlier comment when this 'report' was reported.
From what I have seen in my travels, Singapore is one of a small number of stand out countries in which to live, work and raise a family. I think you may be able to buy a little more cheaply if you can time a fleeting market crisis but waiting on the sidelines may leave you subject to the risk of sharply rising rental rates. And its much better value for lifestyle than HK.
Singapore (and Asia in general) will most probably be facing some more inflation within the next 5 years, properties being long term investments and with today's high real estate prices and financial low interests, how do you see the impact of rate hikes on the Singapore real estate market ?
Prices will go up or down, will be choosen by Government. and Gov will do it by maintaining PR population. Simple demand-supply ratio. Citizens will be out of competition in resale market in next 2 years, due to huge no. of BTO supply this year and next year. If no PR remain in resale marker, due to latest curb in ICA PR grants, Property market in all set to crash in next 2 years max. Let me know if anyone dont agree.
singapore property price been going steep. investors should be careful when purchasng excessive price.
during the last 30 years, I don't think anybody lost money when investing in property for long term. All the time pundits warning investors and despite that increases are a sure thing over the medium term. As sure as 1+1=2.
in my own understanding of the property market trend in the country, i see demand to continue rising, as investor confidence boost the market per se.
whether it is the Euro debt crisis or the speculative measures imposed by both China and Singapore government, a fact is a fact, and the fact is, property prices in the country keep climbing up & up.. the opening of two IRs are just a bonus, contributing to another prices increases in the property market
With the crisis in Greece affecting our country, we really should be cautious in all our dealings.