Sunday, January 15, 2012

Singapore private property sales fell sharply in December 2011

Singapore property developers could sell 632 new private homes in December 2011, significantly lower than the 1,702 units of November 2011. This is a 62 percent month-on-month fall and although some part of the fall can be attributed to the seasonal year-end slowdown, it looks like the last round of cooling measures in December 2011 took its toll on the private property sales.

In December 2011, Singapore government has announced the second round of property market cooling measures and introduced an Additional Buyer's Stamp Duty (ABSD) of 10% for foreigners buying private property in Singapore. Share of foreigners in Singapore private property was 20% as of Q3 2011 which climbed from 16.22% at the beginning of the year.

The numbers are still near record for all 2010 according to The Straits Times:

"This brings the year's total to 16,026 units - just 266 units shy of the record 16,292 units sold in 2010. 
Sales were powered mainly by UOL Group's Archipelago which sold 103 units at a median price of $1,118 per sq ft (psf) and The Nautical in Sembawang Road which sold 84 units at a median price of $882 psf." 
Source : Private home sales in December slump

Singapore New Private Property Sales 2011
The Straits Times also reports that the property cooling measures making home buyers cautious:

"It is the week before Chinese New Year and home buyers, while still turning up in healthy numbers at show-flats, prefer to remain cautious and keep their options open. 
A Straits Times check over the weekend unearthed a steady stream of visitors at show-flats but few buyers. Analysts said the possibility that home prices might fall following the latest round of cooling measures last month kept many potential buyers at bay."

The main worry is (or should be) the European debt crisis. As John Mauldin put it boldly in his last Weekly E-Letter "Europe has not yet really entered into recession, which is almost guaranteed this year". Their banks are "are massively insolvent, because they have 30 times their capital invested in the second problem, which is the sovereign debt of countries that are going to have trouble paying that debt". This does not only mean slow economic growth at best and recession at worst for Singapore, it also means that interest rates can go north if these banks start to pull back capital from Asia to home to improve their capital structure.

There are also some wind changes regarding the Singapore property in 2011 which effects the market. First, there is a large supply of private property coming to the market between 2012 and 2015. Second, slow or negative economic growth combined with stricter Singapore PR and Singapore Work Pass criteria means less tenant to attract for these large pool of new properties, a significant portion of them are bought by foreigners and locals for investment purposes. Third, demand is and will be taken away by a large number of Executive Condominiums, increased earning limits for public housing and large number of HDB units released in 2011 and 2012 (50,000 in total). These all may work against the only supporter of the private property prices : the positive monthly cash flow generated from such property in a ultra-low interest plus ultra-high rent environment. Many owners would simply hold on until this cash flow is positive but they, especially the ones with many mortgages, will have difficult time when this cashflow becomes negative.

In the light of these facts, many analyst predicts price falls some are as high as 30 percent in 2012. So it may well be wise to wait-and-see other than locking into a property just before it falls from its new peek.

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