Will Singapore property prices fall in 2011? This is the most asked question after rounds of property cooling measures. The property developers in Singapore think that although sales volume might have fallen, it is still too early to assess the impact of the cooling measures, according to The Straits Times.
It is really still (by mid Feb 2010) too early to talk. 1,189 (private) units are sold in January 2011, 11% down on December 2010 and 40% down on November 2010. But whether cooling measures really cool the market or not will not be apparent until March 2011 when the Feb 2011 figures are released.
The last property cooling measures on Jan 14th this year are followed by Chinese New Year period so it is really early to talk about the effects. But acccording to vice president of Redas (Real Estate Developer's Association Singapore), "projects launched after Jan 13 still had very decent take up demonstrating that there is still a pool of buyers genuinly in need of homes."
The last measures are aimed at short-term speculators or flippers (people who buy and sell in short cycles with pure speculative investment motives) not real buyers. And it is obvious that it is designed to prevent a bubble form, not to create a price fall. Since the markets are flooded with liquidity and interest rates are historically low, they will probably translate into a slower price increase not a price fall.
For this reason, Singapore property developers look more focused on the market forces and next budget to base their plans on, rather than cooling measures. Singapore economy is tightly integrated with larger world economy and I believe the market forces were very strong in 2010 to support the prices and sales. Singapore government measures would help stabilize the property market and help to decrease effect of a sharp downturn, which is unfortunately still not out of question after 3 years of financial crises coping measures.
Whatever government or markets does, the property prices and their directions are determined by simply supply and demand. Currently property demand in Singapore are supported with:
historically low interest rates,
increase in the population from 4.5 million to 5+ million in just 4-5 years!
decreased number of individuals in an average house
increased wealth of average Singaporean household.
So demand was well supported in 2010.
In 2011, there are some clouds on the demand side. First of all PR influx is significantly reduced since 2009 (although it is still not so low) and this will have an impact on the demand. Second the interest rates will eventually rise, the question is when (2011, 2012?). When the interest rates start to rise or when rumours about their rise are firmly heard the demand will take a real hit (*).
On the supply side, it looks like a significant number of new properties are coming to the market between 2011 and 2014. The question is will this supply be enough to satisfy the demand or will the demand be enough to take up the supply? Putting the question in that way will provide you a more solid answer.
Below is quoted from The Straits Times on Feb 16th 2011:
My answer based on my observations (but no real number crunching yet) is that there will be a price drop towards the end of the year due to decreased demand compared to 2008 - 2011 versus a good supply of new properties coming into the market and , government measures to throw speculators out.
(*) My advice is instead of concentrating on the prices, concentrate on your plans about future interest rates. Never naively assume that the interest rates will be forever near zero and calculate your mortgage based on different interest hike scenarios. Even marginal interest rises from these low levels can have dramatic effect on your monthly payments! Also watch the trend from the property price indexes carefully.
See also Will Singapore property prices fall in 2012 and Singapore property update for 2012
It is really still (by mid Feb 2010) too early to talk. 1,189 (private) units are sold in January 2011, 11% down on December 2010 and 40% down on November 2010. But whether cooling measures really cool the market or not will not be apparent until March 2011 when the Feb 2011 figures are released.
The last property cooling measures on Jan 14th this year are followed by Chinese New Year period so it is really early to talk about the effects. But acccording to vice president of Redas (Real Estate Developer's Association Singapore), "projects launched after Jan 13 still had very decent take up demonstrating that there is still a pool of buyers genuinly in need of homes."
The last measures are aimed at short-term speculators or flippers (people who buy and sell in short cycles with pure speculative investment motives) not real buyers. And it is obvious that it is designed to prevent a bubble form, not to create a price fall. Since the markets are flooded with liquidity and interest rates are historically low, they will probably translate into a slower price increase not a price fall.
For this reason, Singapore property developers look more focused on the market forces and next budget to base their plans on, rather than cooling measures. Singapore economy is tightly integrated with larger world economy and I believe the market forces were very strong in 2010 to support the prices and sales. Singapore government measures would help stabilize the property market and help to decrease effect of a sharp downturn, which is unfortunately still not out of question after 3 years of financial crises coping measures.
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| NUS Singapore Residential Price Index |
historically low interest rates,
increase in the population from 4.5 million to 5+ million in just 4-5 years!
decreased number of individuals in an average house
increased wealth of average Singaporean household.
So demand was well supported in 2010.
In 2011, there are some clouds on the demand side. First of all PR influx is significantly reduced since 2009 (although it is still not so low) and this will have an impact on the demand. Second the interest rates will eventually rise, the question is when (2011, 2012?). When the interest rates start to rise or when rumours about their rise are firmly heard the demand will take a real hit (*).
On the supply side, it looks like a significant number of new properties are coming to the market between 2011 and 2014. The question is will this supply be enough to satisfy the demand or will the demand be enough to take up the supply? Putting the question in that way will provide you a more solid answer.
Below is quoted from The Straits Times on Feb 16th 2011:
"As it stands, the cumulative units launched but unsold have been increasing over the past few months, indicating that supply has already started to outstrip demand... Therefore, some downward pressure on mass market home prices could be expected in the months ahead"
Christine Sun Senior Manager at Savills Research & Consultancy
My answer based on my observations (but no real number crunching yet) is that there will be a price drop towards the end of the year due to decreased demand compared to 2008 - 2011 versus a good supply of new properties coming into the market and , government measures to throw speculators out.
(*) My advice is instead of concentrating on the prices, concentrate on your plans about future interest rates. Never naively assume that the interest rates will be forever near zero and calculate your mortgage based on different interest hike scenarios. Even marginal interest rises from these low levels can have dramatic effect on your monthly payments! Also watch the trend from the property price indexes carefully.
See also Will Singapore property prices fall in 2012 and Singapore property update for 2012
Disclaimer
This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material. Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.
SO what is the conclusion since now is October 2011? and your article was posted in Feb 2011.
ReplyDeleteHi Jerry,
ReplyDeleteSorry for my late reply. I was quite busy last few weeks and did not have time for the blog. I have replied your question in this article:
Singapore property update for 2012
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ReplyDelete