Friday, May 25, 2012

Singapore Property News Update May 2012

Singapore's low interest rate fueled property bubble entered a new phase in 2012, as monthly private home sales for the first 3 month of the year averaged around  2,200 homes per month which is a big jump from 1,300 homes per month. [1] Is this the new "normal"? Well, as Colin Tan said in Today, there is nothing normal about these numbers which solely depends on artificially low interest rates. We will probably see the real damage of printed money on Singapore's economy, when the printing presses stops, as USA has experienced 2006 onward.

As each round of cooling measure does nothing to stop the rise and there seems to be no cooling measure addressing the real issue, low interest rates Singapore is exposed to, people probably started to believe that Singapore property will never go down as long as a large asteroid do not hit the earth.

Ryan Ong writes in

"What happened is 2,487 new units got sold by developers. That’s a 3.9% increase from March, and the biggest record in three years. It’s also the third straight month that private home sales exceeded the 2,300 mark. And just days before, the Ministry of National Development (MND) claimed cooling measures “are working“.
Yeah, sure they are. They’re “working” like I work after five on Fridays. While cooling measures have caused modest price declines, the growing sales volume suggests nothing’s under control yet. Resilient demand, coupled with unrealistic investments (i.e. shoebox apartments, Sky Habitat), are propelling Singapore’s property market toward a potential crash.

Why’s it happening? I put it down to:
  • Uninformed Optimism
  • Low Interest Rates
  • Shoebox Apartments
  • HDB Prices vs. Private Home Prices"

Are Shoebox Apartments Inhuman?
According to Bloomberg, CapitaLand's Chief Executive Officer Liew Mun Leong said Singapore should curb the increasing trend of so-called shoebox apartments because they are almost inhuman.”(Capitaland CEO calls shoebox apartments inhuman)
Well, shoebox apartments are not inhuman, the property prices in Singapore are inhuman. At a time when local newspapers are running articles like "cheap apartments for 1 million and below", shoebox apartments are just a natural response buyers are giving to the price problem.  And they are just one type of damages Western and Chinese money printing presses are causing in Singapore.
Shoebox apartments has recently became very popular due to several factors such as 1 million dollar price tags of condominium units. HDB dwellers, with a dream to own a private property but not enough money to buy a so-called "mass market" bigger unit drove demand for shoebox units in Q1.

Number of Chinese buying property in Singapore down 54 per cent
According to a report published by DTZ Research revealed that Chinese, including permanent residents, bought just 292 homes in the first quarter, down 54 per cent down from the 640 homes bought in the fourth quarter last year and the lowest volume in more than two years. (Buyers from China lose property top spot)

Obviously, the last cooling measure, Additional Buyer's Stamp Duty, which adds a 10% stamp duty for foreign buyers is a big cause. 

According to the report, the fall in foreign purchases is bigger than the 1996. "This could be due to the implementation of other broad-based measures in 1996 which also affected other buyer groups, while the additional buyer's stamp duty had a larger impact on foreign demand."

Private property prices starts to climb up again in April

Overall, prices rose 0.8 per cent from March, when it saw an increase of 0.4 per cent. Prices of high-end units saw a 1.6 per cent increase while that of non-central units stayed stagnant in April. 
Only for shoebox units - measuring 506 sq ft or smaller in this case - did prices fall some 1.2 per cent. In March, this segment picked up by 2.7 per cent.
Source :  Prices of private resale homes inch up again in April

Resale prices for small units, currently in the crosshairs of the Government for possible intervention to cool this market segment, fell 1.2 per cent after the 2.7 per cent rise previously. The SRPI Small index covers homes with a maximum floor area of 506 sq ft. 
Mr Ong said: “Recent concerns are surrounded on the proliferation of shoebox apartments and the exuberance or probably irrationality of buyers in the mass market private housing segment.
Source : Resale private home prices rise

[1] - 2012 new private home sales

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