Thursday, June 7, 2012

Singapore housing oversupply may be on the horizon

Singapore has been exposed to artificial liquidity created by global major economies which has fuelled asset bubbles and inflation in the country. Near zero interest rates are temporarily making million dollar flats “affordable” and “mass market” and since the property prices and number of properties sold do not show any sign of retreat after rounds and rounds of cooling measures, there has also been a sentiment which can be summarized as “as long as a meteor do not hit the planet earth, Singapore property always goes up”. This makes people to bring forward their demand for property. The sales numbers and prices are still going up even though the global economic outlook does not look promising.  As in all bubble times, people are simply ignoring any party spoiler and behaving like they cannot even wait for a few months to see the clear future. Buy now or regret later!

But according to Wing Tai chairman Cheng Wai Keung, the situation may end up with a Singapore housing oversupply:

“Just as pent-up demand saw housing prices shoot up over the past few years, a reverse situation could be at play now, says Wing Tai chairman Cheng Wai Keung.

“People are bringing forward their decisions to buy property as they fear prices may rise. As a result, demand in subsequent years may be lower than what is projected based on current demand. This would worsen an oversupply situation. On the top of that if the economy is not so good at that time, it will compound the problem.”

“The current housing cycle has lasted more than I have expected” he adds. “The effects of five rounds of cooling measures have been short lived. And despite the fact that the government has increased supply for so many years, the property market has not subsided.” He attributes this to a cocktail of past undersupply, Singapore’s population growth and liquidity.[1]

West, particularly USA, is printing money to punish saving and force spending but since this money flows to Asia and creates a dangerous and damaging investment environment. Near zero interest rates here and persistently high inflation punishes money saved in bank and forces people to buy assets to hedge against inflation. This is fuelling the property demand and prices but any turn in this scenario like an increase in interest rates would take the floor below the Singapore’s property bubble.

 [1] – Housing oversupply on the horizon, says Wing Tai boss, The Business Times

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.

No comments:

Post a Comment