Sg property willnot crash. DONT BE SILLY
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Property prices CRASHES ..........you wait long long......
- Thread starter Force 136
- Start date
Sg property willnot crash. DONT BE SILLY
The crash is going to begin from the resale market... Moreover in Budget 2013, PAP has already annouced increase taxes for investment properties and no rebate for vacant properties for 2014.
http://sbr.com.sg/residential-property/news/hdb-resale-transactions-plunged-245
HDB resale transactions plunged 24.5% in Q1 2013
http://sbr.com.sg/residential-property/news/resale-private-homes-in-singapore-plunged-433
Resale of private homes in Singapore plunged 43.3% in Q1 2013
http://sbr.com.sg/residential-property/news/prices-resale-condos-dipped-04-in-april
Prices of resale condos dipped 0.4% in April 2013
http://sbr.com.sg/residential-property/news/hdb-resale-volume-crashed-36-in-april
HDB resale volume crashed 36% in April 2013
http://sbr.com.sg/residential-property/news/new-private-home-sales-crashed-51-in-april
New private home sales crashed 51% in April 2013
http://sbr.com.sg/residential-property/news/resale-volume-condos-crashed-40-in-may
Resale volume of condos crashed 40% in May 2013
http://www.channelnewsasia.com/news/singapore/resale-prices-of-private/700982.html
Resale prices of private homes down 0.5% in May 2013: SRX
http://sbr.com.sg/residential-property/news/condo-rents-in-singapore-dipped-06
Condo rents in Singapore dipped 0.6% in May 2013
- For 4th month in a row.
http://sbr.com.sg/residential-property/news/hdb-median-rents-dropped-50-2350-in-may
HDB median rents dropped by $50 to $2,350 in May 2013
http://sbr.com.sg/residential-property/news/hdb-resale-transactions-plunged-245
HDB resale transactions plunged 24.5% in Q1 2013
http://sbr.com.sg/residential-property/news/resale-private-homes-in-singapore-plunged-433
Resale of private homes in Singapore plunged 43.3% in Q1 2013
http://sbr.com.sg/residential-property/news/prices-resale-condos-dipped-04-in-april
Prices of resale condos dipped 0.4% in April 2013
http://sbr.com.sg/residential-property/news/hdb-resale-volume-crashed-36-in-april
HDB resale volume crashed 36% in April 2013
http://sbr.com.sg/residential-property/news/new-private-home-sales-crashed-51-in-april
New private home sales crashed 51% in April 2013
http://sbr.com.sg/residential-property/news/resale-volume-condos-crashed-40-in-may
Resale volume of condos crashed 40% in May 2013
http://www.channelnewsasia.com/news/singapore/resale-prices-of-private/700982.html
Resale prices of private homes down 0.5% in May 2013: SRX
http://sbr.com.sg/residential-property/news/condo-rents-in-singapore-dipped-06
Condo rents in Singapore dipped 0.6% in May 2013
- For 4th month in a row.
http://sbr.com.sg/residential-property/news/hdb-median-rents-dropped-50-2350-in-may
HDB median rents dropped by $50 to $2,350 in May 2013
From boom, to blowing bubbles
Singapore’s property market has been framed as a success story. Prices have moved inexorably up since 2005 despite several rounds of cooling measures.
Property forms the largest asset within each household balance sheet. Judging by news reports of packed showrooms, it would seem that most Singaporeans feel positive about the future of the property market. Is the optimism justified or are they headed for a fall?
WHAT DROVE THE BOOM
Following the 1997 Asian Dollar Crisis, the domestic property market went into decline and remained subdued by the effects of successive economic shocks until 2005. From that point, with the exception of a dip due to the 2009 global financial crisis, the property market as marked to price moved ever higher.
There are several drivers which explain this pick-up. First, there was under-supply in the public housing market after years of slow building due to cautious government policy, following the surplus scare in the wake of the 1997 Asian Dollar Crisis.
Second, there was pent up domestic demand, after almost a decade of neglect as an asset class due to a combination of market wariness and lagging supply.
Third, the population has grown at a fast clip through population augmentation. The majority of new citizens and permanent residents are adults with purchasing power. Population growth has also meant good rental demand which translates into mortgage cover for investors.
Fourth, segments of the Singapore property market have become internationalised. Local property is being marketed in far-flung destinations to attract High Net-worth Individuals (HNI) to invest here. While this is mostly concentrated on the high end it has a positive psychology effect on the entire market, creating a buzz which property developers and real estate agents can be expected to opportunistically exploit.
Fifth, there has been a sustained and significant fall in interest rates over the past decade, but especially since 2005. This has lowered the cost of debt and disincentivised savings. Singaporeans seeking yield have moved savings into equity and property.
Sixth, in property cycles, after a certain point in the upswing, the herd effect makes itself known. The longer the good run lasts, the more it is sustained just a bit longer by new market entrants who want to get in on the action.
Seventh, Singapore experienced a sharp but very short recession as a consequence of the global financial crisis. Our economic numbers have been positive, though just shaving past experiencing a technical recession each year. This positive momentum and a tight labour market have to date translated into an absence of natural economic checks on buying behaviour.
WHAT’S NEXT: HIGHER SUPPLY, LOWER DEMAND
Now let us look at the current and anticipated state of these demand drivers.
First, accelerated and intensified building by the Housing and Development Board (HDB) will remedy the demand and supply mismatch in the public housing market by 2016. The URA has released many land parcels over the past three years which will continue to translate into new housing units in the private market, especially in the mass market condominium segment. In all, nearly 200,000 new units are due to be completed by 2016.
Second, the pent-up demand from the first half of the last decade has been soaked up by now.
Third, notwithstanding the adoption of the White Paper on population, Prime Minister Lee Hsien Loong has pledged to moderate the rate of population growth and look at a total population ceiling of 6 million, rather than 6.9 million, by 2030.
This addition of less than a million means the annualised pace of growth would be less than half that we have experienced over the past five years. Hence, demand from population augmentation should be far less over time.
Further, the higher the price index goes, the higher rentals must be to provide mortgage cover for investors. At a certain point rental levels cannot be supported by wage levels, which will then catch out investors reliant on a certain level of rent to meet their payments.
Fourth, expect the high-end segment of the market to continue attracting foreign investment.
However the buyer in the mass market – public resale or private – should screen out high end price behaviour when determining what is fair value. This is because the foreign (or local) HNI is not influenced by domestic factors nor by the same practical considerations, such as the need for income security or rental cover, as faces the layman investor or buyer.
INTEREST RATES: ONLY WAY IS UP
Fifth, interest rates cannot be expected to say so low for ever. As the macro economy slowly recovers, we should expect that quantitative easing by major economies will wind down and that eventually, interest rates will creep back up.
There is something pernicious about a low interest rate environment which is worth noting. A 100 basis (1 percentage point) move upwards when the initial interest is 5 per cent – the rate circa 2000 – would represent a 20 per cent higher weight of capital, which is a hit most will likely be able to afford.
However a similar-sized move when the initial interest rate is 2 per cent – the rate circa 2012 – would represent a 50 per cent higher weight of capital. Hence those who have borrowed to the limit of their debt serviceability would be extremely vulnerable to future rate shifts, which can only be upwards given how low they have been in recent years.
Sixth, so the only strong driver we can count on for the foreseeable future is the herd effect. The problem with the herd effect is that it does not reflect real fundamental demand, since a significant proportion would be speculative. It also may not reflect real effective demand, given that some caught in the herd effect may be over-exposing themselves.
Seventh, while we have done comparatively well economically over the past four years we should not expect unrealistically for this to continue without some eventual interruption. Singapore’s economic health is contingent on what happens in the larger global economy. Shocks should be expected – the only questions are when, with how much warning and how seriously.
RISKS AND EXPOSURE
Contrary to the rosy inference that higher property prices suggest a healthy economy, I would argue that we are now facing systemic risks in the medium and long-term, as well as at the household and financial system levels.
A large number of Singaporeans have exposure to the property market which may make them financially vulnerable when there is another economic shock. Most households have been able to weather previous crises due to a strong cash reserve in the form of savings. However, the larger down payment and stamp duty requirements introduced in successive cooling measures imply an erosion of that cash reserve. This increases the depth of their vulnerability.
At the financial system level, our local banks have a significant loan book exposure to the property sector of 30 per cent. While this still meets the conditions of Section 35 of the Banking Act, it represents a non-trivial risk factor. There is a systemic risk to the financial system if we experience a significant economic shock that inverts the property market, as happened in 1997-98.
Finally, for Singaporean households to lock up so much liquidity in the illiquid property market represents two distinct risks. The first, that in future years there may be unintentionally coordinated disinvestment through sales, as retirement or other life adjustment effects make themselves felt. This would create supply-and-demand distortions which can be difficult to contain.
Second, taking on large debt in the property sector reduces the incentive to take risks in other areas – this can have a suppressant effect on the entrepreneurial impulse of young people by limiting them to ‘safe’ salaried employment.
A MORAL HAZARD
In the event that we have an inversion of the property market – due to economic shock or supply overrun/ demand undershoot – we would do well to avoid a moral hazard situation where the Government comes to the rescue of households or the financial system.
It is important that the lessons of risk management be learnt, and that those who were avaricious or imprudent do not get to have their cake and eat it too with the aid of tax dollars. But if an inversion occurs in the period approaching 2016, it is not unnatural to expect considerable political temptation for the Government to intervene.
The nature of “bubble calling” is that bubbles are easy enough to see in hindsight, but just about everyone will find them invisible to fathom with foresight – either out of self-interest or because of the ‘’noisiness’ of all the varied indicators. However, the systemic risks are such that if “this time is different”, as people like to assume, it is only so in the most negative of ways.
Singapore’s property market has been framed as a success story. Prices have moved inexorably up since 2005 despite several rounds of cooling measures.
Property forms the largest asset within each household balance sheet. Judging by news reports of packed showrooms, it would seem that most Singaporeans feel positive about the future of the property market. Is the optimism justified or are they headed for a fall?
WHAT DROVE THE BOOM
Following the 1997 Asian Dollar Crisis, the domestic property market went into decline and remained subdued by the effects of successive economic shocks until 2005. From that point, with the exception of a dip due to the 2009 global financial crisis, the property market as marked to price moved ever higher.
There are several drivers which explain this pick-up. First, there was under-supply in the public housing market after years of slow building due to cautious government policy, following the surplus scare in the wake of the 1997 Asian Dollar Crisis.
Second, there was pent up domestic demand, after almost a decade of neglect as an asset class due to a combination of market wariness and lagging supply.
Third, the population has grown at a fast clip through population augmentation. The majority of new citizens and permanent residents are adults with purchasing power. Population growth has also meant good rental demand which translates into mortgage cover for investors.
Fourth, segments of the Singapore property market have become internationalised. Local property is being marketed in far-flung destinations to attract High Net-worth Individuals (HNI) to invest here. While this is mostly concentrated on the high end it has a positive psychology effect on the entire market, creating a buzz which property developers and real estate agents can be expected to opportunistically exploit.
Fifth, there has been a sustained and significant fall in interest rates over the past decade, but especially since 2005. This has lowered the cost of debt and disincentivised savings. Singaporeans seeking yield have moved savings into equity and property.
Sixth, in property cycles, after a certain point in the upswing, the herd effect makes itself known. The longer the good run lasts, the more it is sustained just a bit longer by new market entrants who want to get in on the action.
Seventh, Singapore experienced a sharp but very short recession as a consequence of the global financial crisis. Our economic numbers have been positive, though just shaving past experiencing a technical recession each year. This positive momentum and a tight labour market have to date translated into an absence of natural economic checks on buying behaviour.
WHAT’S NEXT: HIGHER SUPPLY, LOWER DEMAND
Now let us look at the current and anticipated state of these demand drivers.
First, accelerated and intensified building by the Housing and Development Board (HDB) will remedy the demand and supply mismatch in the public housing market by 2016. The URA has released many land parcels over the past three years which will continue to translate into new housing units in the private market, especially in the mass market condominium segment. In all, nearly 200,000 new units are due to be completed by 2016.
Second, the pent-up demand from the first half of the last decade has been soaked up by now.
Third, notwithstanding the adoption of the White Paper on population, Prime Minister Lee Hsien Loong has pledged to moderate the rate of population growth and look at a total population ceiling of 6 million, rather than 6.9 million, by 2030.
This addition of less than a million means the annualised pace of growth would be less than half that we have experienced over the past five years. Hence, demand from population augmentation should be far less over time.
Further, the higher the price index goes, the higher rentals must be to provide mortgage cover for investors. At a certain point rental levels cannot be supported by wage levels, which will then catch out investors reliant on a certain level of rent to meet their payments.
Fourth, expect the high-end segment of the market to continue attracting foreign investment.
However the buyer in the mass market – public resale or private – should screen out high end price behaviour when determining what is fair value. This is because the foreign (or local) HNI is not influenced by domestic factors nor by the same practical considerations, such as the need for income security or rental cover, as faces the layman investor or buyer.
INTEREST RATES: ONLY WAY IS UP
Fifth, interest rates cannot be expected to say so low for ever. As the macro economy slowly recovers, we should expect that quantitative easing by major economies will wind down and that eventually, interest rates will creep back up.
There is something pernicious about a low interest rate environment which is worth noting. A 100 basis (1 percentage point) move upwards when the initial interest is 5 per cent – the rate circa 2000 – would represent a 20 per cent higher weight of capital, which is a hit most will likely be able to afford.
However a similar-sized move when the initial interest rate is 2 per cent – the rate circa 2012 – would represent a 50 per cent higher weight of capital. Hence those who have borrowed to the limit of their debt serviceability would be extremely vulnerable to future rate shifts, which can only be upwards given how low they have been in recent years.
Sixth, so the only strong driver we can count on for the foreseeable future is the herd effect. The problem with the herd effect is that it does not reflect real fundamental demand, since a significant proportion would be speculative. It also may not reflect real effective demand, given that some caught in the herd effect may be over-exposing themselves.
Seventh, while we have done comparatively well economically over the past four years we should not expect unrealistically for this to continue without some eventual interruption. Singapore’s economic health is contingent on what happens in the larger global economy. Shocks should be expected – the only questions are when, with how much warning and how seriously.
RISKS AND EXPOSURE
Contrary to the rosy inference that higher property prices suggest a healthy economy, I would argue that we are now facing systemic risks in the medium and long-term, as well as at the household and financial system levels.
A large number of Singaporeans have exposure to the property market which may make them financially vulnerable when there is another economic shock. Most households have been able to weather previous crises due to a strong cash reserve in the form of savings. However, the larger down payment and stamp duty requirements introduced in successive cooling measures imply an erosion of that cash reserve. This increases the depth of their vulnerability.
At the financial system level, our local banks have a significant loan book exposure to the property sector of 30 per cent. While this still meets the conditions of Section 35 of the Banking Act, it represents a non-trivial risk factor. There is a systemic risk to the financial system if we experience a significant economic shock that inverts the property market, as happened in 1997-98.
Finally, for Singaporean households to lock up so much liquidity in the illiquid property market represents two distinct risks. The first, that in future years there may be unintentionally coordinated disinvestment through sales, as retirement or other life adjustment effects make themselves felt. This would create supply-and-demand distortions which can be difficult to contain.
Second, taking on large debt in the property sector reduces the incentive to take risks in other areas – this can have a suppressant effect on the entrepreneurial impulse of young people by limiting them to ‘safe’ salaried employment.
A MORAL HAZARD
In the event that we have an inversion of the property market – due to economic shock or supply overrun/ demand undershoot – we would do well to avoid a moral hazard situation where the Government comes to the rescue of households or the financial system.
It is important that the lessons of risk management be learnt, and that those who were avaricious or imprudent do not get to have their cake and eat it too with the aid of tax dollars. But if an inversion occurs in the period approaching 2016, it is not unnatural to expect considerable political temptation for the Government to intervene.
The nature of “bubble calling” is that bubbles are easy enough to see in hindsight, but just about everyone will find them invisible to fathom with foresight – either out of self-interest or because of the ‘’noisiness’ of all the varied indicators. However, the systemic risks are such that if “this time is different”, as people like to assume, it is only so in the most negative of ways.
There are 30,000 registered property agents in Singapore, but the number of property transactions have crashed. Thousands of property agents can eat grass liao, those that cannot make it better think of switching to another career instead of doing free labour for developers and sellers.
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From your beloved PAP...
http://www.channelnewsasia.com/news/singapore/property-buyers-should/663538.html
Property buyers should consider future interest rate hikes: Khaw
SINGAPORE : National Development Minister Khaw Boon Wan has urged those who might be looking to buy property to take into account future spikes in interest rates.
Speaking during a dialogue with young Singaporeans, he also cautioned buyers not to over-commit.
He explained that the current low interest rates for home loans will not last forever, and the eventual rate may be many percentage points higher than it is today.
He also offered advice for property buyers.
Mr Khaw said: "They assume two things. Property prices will keep going (up). Two, interest rates will keep on remaining low. Both are wrong and therefore one day, both will collapse on them. So, if you are over-committed, let's say you can only afford a 3-room flat, (but) you decide to buy five room flat. Yes, based on today's interest rates you can afford a five-room flat. But, when interest rates go up as it will, you will no longer be able to afford a five-room flat and what will happen, your bank will start calling you up to please top up or sell your flat and that's when trouble starts."
In addition, Mr Khaw said the high property prices will not last in the long run.
He added: "Only when you can get enough buyers who can afford, will prices stay up, if not they will come down. Today because of low interest rates, this bubble is being pushed up and sustained longer than it should have. So, it will collapse in a matter of time and therefore do not think that prices will keep on going up.
Residential property may have crashed, but there still are other sectors.
There are much more residential properties than commercial properties...
Most Investors for both commercial and residential properties use Fed induced artificially cheap loans to finance their property purchases, when interest rates goes up means rental
yields goes down. Rental yields in Singapore is already very low from the overpriced property prices and oversupply, rising interest rates could drive yield down even further and possibly to negative...
Reits prices and property stocks have dropped significantly due to the looming threat of rising interest rates...
A big correction in property prices could be good for agents as it could lead to more transactions...
Almost everybody speak from their vested interest.
Those that own properties will talk the market up. Those without, want the property market to crash.
How many are objective enough to look at the issue in the eye (whether they own properties or not) and comment fairly ?
So always ask the first question when you hear people speak ..... what's their vested interest ..... because most people are more concerned about their own toothache than whether their neighbour live or die.
Those that own properties will talk the market up. Those without, want the property market to crash.
How many are objective enough to look at the issue in the eye (whether they own properties or not) and comment fairly ?
So always ask the first question when you hear people speak ..... what's their vested interest ..... because most people are more concerned about their own toothache than whether their neighbour live or die.
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Yes very right, if the market falls, there will always be a pool of buyers waiting to enter, meanwhile agents can switch to rentals to supplement their incomes.....only the ignorant will look at sales transactions and make assumptions that agents will be eating grass..... Resourceful agents just diversify into other markets.
Owners are getting resourceful too, more and more are doing rental renewals themselves... cut off the middleman and save on commission. More developers and big owners are also doing rental work inhouse. When I refer to transactions for agents, it's both sales and rental transactions. Rental transactions are also getting increasingly short term.
Like I say there are 30,000 registered property agents in Singapore, there's not enough business to go around in the current difficult environment, only a small percentage is doing ok, what about the rest?
You say diversify into other markets? which markets? Don't be vague.
Views from a professional investor...
http://www.todayonline.com/business/coutts-asia-cio-bearish-singapore-property
Coutts Asia CIO bearish on Singapore property
03 June
SINGAPORE — Investors appear to be “in denial” about the risks over residential property in Hong Kong and Singapore and that a slowdown in purchases will mean lower prices, private bank Coutts’ chief investment officer for Asia and the Middle East said today (June 3).
“You get that fuzzy period when everyone tells you everything is fine until the point when the bank tells you (that) you must sell or you face a cash-flow problem,” Mr Gary Dugan told the Reuters Wealth Management Summit in Singapore.
“That new price point could be dramatically below where we are.”
Mr Dugan is bearish on residential property in Hong Kong and Singapore, an asset class hugely popular among rich Asians, and noted that the fall in prices has already begun in Asian real estate investment trusts (REITs).
REITS dropped sharply in value last week.
“People realise we have seen the low point in interest rates and therefore if I go out and borrow money today on a flexible rate, I could see the cost of that loan go up by a 100 basis points or 200 basis points over the course of the next one to two years,” Mr Dugan said.
Tat means to keep property prices high. Or to prevent a price drop Pap just remove the cooling measures introduced, ensure interest rates remain low n all will b fine. I dont see the logic of increasing rates when there is an economic slowdown.
Bro lucky, if private property are still selling like hotcakes, why are many owners struggling to sell their private properties? Even many new launches and not new launches are struggling to sell their remaining units for months.
New launch ulu area with 99 year lease sell for more than 1300psf? I know of a launch with better location selling for less. What about Bartley Ridge? next to Bartley MRT, selling for around $1100 psf.
Do your home work, as a clue go to Property Guru and see for yourself the categories of agents there are, don't expect trade secrets to be leaked out. Strange that you seem to make comments like an expert on agents and yet you have to ask such questions.
Solid investors won't touch 99 year lease properties. My area of investments still getting high yields and sold on expressions of interest only ie. once there is a sufficient pool of buyers interested, they have to submit their bids to buy and believe me the biddings are furious.
All these thanks to my good network and relations with my agents who sniff out good deals and later help me get good sales. Many times tapping on different sets of agents with their own unique niche strengths.
As long as the majority still think that agents are liabilities and paid more than they should be, they will never really profit from the property market and the tougher the market gets, the more valuable are agents services, in good times even a monkey can help u buy and sell property.
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Who got the most vested interests? Pap lah.
And they control everything....they are well able to manipulate the market to a big extent....current high prices is proof.
Not everyone who own properties want market to go up....some worry about theirs kids not be able to afford one in future.
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There will be some minor adjustment in the short term but long term wise, there will be no crash unless there is WW3.
politically speaking it is suicidal for PAP. Most of the homeowners and investors are above middle age, the vote bank of PAP. With youngster no longer supporting PAP, the party cannot afford to lose the middle age segment. Who would like to see their retirement nest depreciating when they are about to cash out for retirement?
politically speaking it is suicidal for PAP. Most of the homeowners and investors are above middle age, the vote bank of PAP. With youngster no longer supporting PAP, the party cannot afford to lose the middle age segment. Who would like to see their retirement nest depreciating when they are about to cash out for retirement?
Wonder how much longer lemmings sorry I mean silliporeans going to jump in and commit hara kiri .
The Chinese economy is slowing down and the banking system is in trouble .
Of course Tummysick think otherwise and continue to use public funds to invest there with the approval of the 60%.
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