February 2011 is the first full month after the Jan 14th 2011 Singapore property market cooling measures and the private property February sales figures are just released. 1,101 private homes were sold in February 2011, 9% down from 1,209 in January 2011 (including executive condominiums (EC), the total number would be 1,228). This is the lowest figure of the last 4 months but m-o-m decline is same with February 2010 figures compared to January 2010. Also sales number are strong over 1,000 units and we can safely assume that while speculators (flippers) are out, there is still strong genuine demand for private properties.
It looks like Singapore Government is achieving to prevent a property bubble by kicking speculation out. The sales are lowering also. But I personally believe as long as borrowing cost and bank deposit interests are ridiculously low while inflation is high (welcome to 2011), the property demand will be there since inflation punishes cash savers and makes borrowing cost negative. If you pay 2% interest on your home loan and inflation is 4%, you are actually having -2% real interest rate, 2% net gain provided that your property do not loose real value.
While most Asian riches keep large amount of cash, they will have no choice but to buy real assets to protect themselves from inflation. While there are a lot of assets options for investors, assets which can be touched and felt, especially property has its own place in Asian culture. Most Asians will prefer to buy a flat they can see and feel instead of pumping large sums of money to bytes in computers (stocks, futures, etc.).
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"The fact that sales volume stayed above the healthy level of 1,000 units in February even when the full impact of the cooling measures would likely have set in is an indication of the resilience of the market against the latest set of cooling measures."
Source: Todays Online Tay Huey Ying, Colliers InternationalBut there are signs in the data pointing out the fact that government property cooling measures have some impact on the sales. Buyers are downgrading to cheaper and out of the central area units. Below 1,200 SGD per sqf units are 58% of the sales, highest since June 2009. And also only one project sold more than 100 units in February:
“The number of transactions indicate very clearly that there is still a strong demand for private property, despite the fact that February is a short month and incorporates the traditionally quiet Lunar New Year festive period, in addition to the impact of the cooling measures on the entire month, 1,228 transactions is a healthy total.
“However, the downward trend in price preference shows that the cooling measures are indeed having an impact,” referring to the higher percentage of transactions occurring in the mass market.
“As a result of the cooling measures,” he elaborates, “the market is seeing fewer investors in the Central Regions, as compared to more homeowner-occupiers in the Outside Central Region (OCR)."
He points out that the four top-selling projects for February 2011 all came from the OCR: Waterfront Isle, My Manhattan, Austville Residences and Canberra Residences. Together, these four projects accounted for 473, or 38.5%, of all units sold for the month.
Mohamed Ismail, PropNex - Source: PropNex
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| Waterfront Isle at Bedok Reservoir sold 282 units in February 2011 - Source: condosingapore.com |
It looks like Singapore Government is achieving to prevent a property bubble by kicking speculation out. The sales are lowering also. But I personally believe as long as borrowing cost and bank deposit interests are ridiculously low while inflation is high (welcome to 2011), the property demand will be there since inflation punishes cash savers and makes borrowing cost negative. If you pay 2% interest on your home loan and inflation is 4%, you are actually having -2% real interest rate, 2% net gain provided that your property do not loose real value.
While most Asian riches keep large amount of cash, they will have no choice but to buy real assets to protect themselves from inflation. While there are a lot of assets options for investors, assets which can be touched and felt, especially property has its own place in Asian culture. Most Asians will prefer to buy a flat they can see and feel instead of pumping large sums of money to bytes in computers (stocks, futures, etc.).
Related Articles:
- Singapore property prices are up in January 2011
- Did Singapore Government cooling measures cooled the property market?
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.
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