Saturday, July 21, 2012

Direction of Singapore private property prices in 2012

Since the USA, China and Europe started to print huge amounts of money in 2009, as most of the assets, Singapore property prices have been inflated to record high levels. Last time the prices went to these new peaks, things did not end up nicely (see Asian Financial Crisis) but as long as West and China continue to keep interest rates low, the huge amount of resources will probably continue to be misallocated to this unproductive investment and prices would go up or stay stable. Or will they?

As some people continue to say "this zero interest rate party cannot last forever", it is again and again lasting without any end in sight and many people who have been prudent before are jumping to property party. 

Now many ask the same questions which cannot be answered easily? Will property prices in Singapore fall or rise? Will there be another property cooling measure?  These questions are important since almost everyone on the island whether they own a property to stay in or to rent out or flip in the future, are professional or amateur property investors and many basically channel their retirement savings, CPF ordinary accounts, to the monthly mortgage payments. Analysts Alaric Yeo and Elaine Chow from HSR Research & Consultancy, expect residential property prices in Singapore to remain largely flat with marginal and gradual growth, barring more Government intervention:

The record supply in the pipeline could help alleviate any pent-up demand in the OCR sub-market, thereby preventing spikes in property prices. In the mid to long term, strengthening global economies would also boost investor sentiment, leading to a gradual recovery of CCR and RCR prices. 
The authorities have said they will continue to monitor the residential market closely to ensure stability and sustainable growth. As such, based on the URA flash estimates for Q2 2012, We do not expect the imposition of more cooling measures yet.Source : Home prices at record high, seen peaking

Singapore’s biggest decline in home sales in 2 1/2 years,  may also slow gains that pushed property prices to a record high, easing concerns of further government curbs, according to Bloomberg. But many experts local media consult, who earn their money from selling property or advise to property buyers and dependent on positive sentiment, naturally dismiss any indication of a property sales and price decline.

To me, Singapore looks like USA in 2004 - 2005. Like there there is a zero interest rate inflated property prices and sales and anyone who tries to put a potentially painful end to the party are laughed at. In fact, Singapore property market looks sadly as a textbook case of the damage, artificially low interest rates can do to the resources of a country. Huge amount of money is flowing into 4 walls and unit sizes are shrinking to unpractical quite fast and still, 1 million SGD + became the new mass market property type!

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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