When you want to predict the future of a market, the best and most reliable tool is fundamental analysis. Since prices are determined by supply and demand in a free market, predicting the future of demand and supply will give you a better picture of the trends in a market.
Where will the property prices in Singapore head to in 2011? Will they fall? Or will they go up? There are some good articles out there asking and answering the correct questions: Will the supply of properties exceed the demand or visa versa in Singapore?
In his article The key is to look at demand and supply Ku Swee Yong, founder of real estate agency International Property Advisor advises us to look at what really matters: supply and demand:
None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand — physical demand from home users, as opposed to demand based on buy-sell transactions.
Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the “under construction” condominiums can be completed within 36 months.
In Potential oversupply to hit prices article, Singapore Property Blog also discusses this issue in detail. Much of the price increase today can be attributed to multiple demand feeding circumstances, fast increase of the population, record low interest rates, shrinking family size in Singapore, increasing family income, high earning foreigner influx, etc. They look at the supply side and conclude that there is a significant supply of new homes in the next 4-5 years while the government restricts foreigner intake by tightening Singapore PR issuance. Although the official population target for Singapore is 6.5 million, 1.5 million over the current population, nobody really knows to what extend the immigration will be tightened. So demand is really hard to predict but it is obvious that it will not be strong as the demand between 2009-2010. For further discussion also refer to their article The hazy mix of cooling measures excess liquidity and real demand.
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