Singapore Property in 2015 and Beyond
The Singapore property market is not in good shape today.
Transactions have come to a standstill.
Buyers are waiting on the sidelines for fire-sales and sellers are standing firm on the prices unwilling to sell for cheap.
SHORT TERM OUTLOOK (1 to 2 years) I think that everyone can agree that in the short term, the Singapore property market is on a downward trend.
Interest rates have risen, rents have fallen and a large incoming supply of new T.
O.
P flats have put increasing pressure on already weakening prices.
This bodes well for first timers (buyers) but not so much for sellers.
Simply put, today is a buyer's market.
The group that will be worst hit are investors who have high bank borrowings and cannot sell the property because of the seller's stamp duty.
We could see more mortgagee sales this year, as a result.
There will be people who will be happy, such as the buyers, but they will also be trying to catch the market at the lowest point.
So demand will still be weak and falling prices will become a self-fulfilling prophecy.
Naturally the next question would be "How much more will the market fall"? HOW MUCH MORE WILL THE MARKET FALL Well, in all honesty, nobody knows.
What we can do however, is make an educated guess on this.
First of all, it is highly unlikely that prices will go back to pre 2008 levels.
One rule to always remember, is that the market is ALWAYS RIGHT.
The market is determined by thousands upon thousands of transactions.
This means that we as a collective has determined that this is the correct price.
If it wasn't, then we would not be buying and as such, we do not think that prices at 2008 levels would be possible.
These past 7 years in my opinion was the market correcting itself to the correct price.
Of course, this is due in part to increased supply and limited demand but we'll cover that later.
In our opinion, prices will most probably come down by at most another 5% to 8%.
The Singapore property market is invariably linked to HDB and its many policies.
Among which, is the HDB interest rate which is fixed at 2.
6% or 0.
1% above the CPF rate.
One of the reasons of the downtrend today is the rising interest rates.
This has caused players that have overleveraged/overborrowed to sell their properties below market rates for a quick sale.
Most HDBs are not affected by this as most are on HDB home loan.
So we see HDB as a price bottom especially when the bank rates start to hit 2.
6%.
We predict that prices will continue in a slow and gradual slide while bank rates climb to the 2.
6% mark.
At which point, the property market should bottom out and enter into a stage of consolidation where upon it will slowly rise or remain.
Any dips after this should be inconsequential and short lived.
LONG TERM OUTLOOK (5 to 10 years) Today's tepid market conditions is due mainly to the various cooling measures that the government has (rightfully) implemented.
We think that it is highly unlikely that the government will allow prices to slide too far as Singapore has one of the highest rate of home-ownership in the world.
A market crash would be disastrous and would not be in the best interest of the country.
We are bullish on the Singapore market long term.
There are strong fundamentals at play here.
The Singapore government has previously announced plans for a targeted 6M population in the next 5 years (Year 2020) and 6.
9M in 2030.
That's an additional 1,500,000 persons.
Any surplus in housing will be consumed by then.
In addition, with the improving global economy, we foresee a bright future for the Singapore market.
Transactions have come to a standstill.
Buyers are waiting on the sidelines for fire-sales and sellers are standing firm on the prices unwilling to sell for cheap.
SHORT TERM OUTLOOK (1 to 2 years) I think that everyone can agree that in the short term, the Singapore property market is on a downward trend.
Interest rates have risen, rents have fallen and a large incoming supply of new T.
O.
P flats have put increasing pressure on already weakening prices.
This bodes well for first timers (buyers) but not so much for sellers.
Simply put, today is a buyer's market.
The group that will be worst hit are investors who have high bank borrowings and cannot sell the property because of the seller's stamp duty.
We could see more mortgagee sales this year, as a result.
There will be people who will be happy, such as the buyers, but they will also be trying to catch the market at the lowest point.
So demand will still be weak and falling prices will become a self-fulfilling prophecy.
Naturally the next question would be "How much more will the market fall"? HOW MUCH MORE WILL THE MARKET FALL Well, in all honesty, nobody knows.
What we can do however, is make an educated guess on this.
First of all, it is highly unlikely that prices will go back to pre 2008 levels.
One rule to always remember, is that the market is ALWAYS RIGHT.
The market is determined by thousands upon thousands of transactions.
This means that we as a collective has determined that this is the correct price.
If it wasn't, then we would not be buying and as such, we do not think that prices at 2008 levels would be possible.
These past 7 years in my opinion was the market correcting itself to the correct price.
Of course, this is due in part to increased supply and limited demand but we'll cover that later.
In our opinion, prices will most probably come down by at most another 5% to 8%.
The Singapore property market is invariably linked to HDB and its many policies.
Among which, is the HDB interest rate which is fixed at 2.
6% or 0.
1% above the CPF rate.
One of the reasons of the downtrend today is the rising interest rates.
This has caused players that have overleveraged/overborrowed to sell their properties below market rates for a quick sale.
Most HDBs are not affected by this as most are on HDB home loan.
So we see HDB as a price bottom especially when the bank rates start to hit 2.
6%.
We predict that prices will continue in a slow and gradual slide while bank rates climb to the 2.
6% mark.
At which point, the property market should bottom out and enter into a stage of consolidation where upon it will slowly rise or remain.
Any dips after this should be inconsequential and short lived.
LONG TERM OUTLOOK (5 to 10 years) Today's tepid market conditions is due mainly to the various cooling measures that the government has (rightfully) implemented.
We think that it is highly unlikely that the government will allow prices to slide too far as Singapore has one of the highest rate of home-ownership in the world.
A market crash would be disastrous and would not be in the best interest of the country.
We are bullish on the Singapore market long term.
There are strong fundamentals at play here.
The Singapore government has previously announced plans for a targeted 6M population in the next 5 years (Year 2020) and 6.
9M in 2030.
That's an additional 1,500,000 persons.
Any surplus in housing will be consumed by then.
In addition, with the improving global economy, we foresee a bright future for the Singapore market.
