Tuesday, September 13, 2011

Singapore Residential Property Prices to fall 8-10% in 2012

Will property prices fall in Singapore? After all these economic uncertainties,  many are asking this question. If you look at the press and TV, almost all "experts" are saying that the prices at most will stay flat next year or , at worst case scenario, drop slightly. You should be cautious about these experts if you are new in Singapore. This is because Singapore media almost always ask the question to people from companies who earn their revenue by selling property. So it is not surprising to see that according to the experts, as long as world does not come to end, property prices will not come down :)

But an expert today gave a different opinion and answer. "Singapore residential property prices are expected to fall 8 to 10 per cent in 2012" said UOB Kay Hian. Huge supply of properties coming in the next 2-3 years, bad economic environment waiting for the world and Singapore combined with the government property cooling measures seems to be stronger than the zero interest rate environment promised by FED (Singapore interest rates usually follow US rates)[1]

Singapore property prices rose 17 percent in 2010 after declining 25 percent during 2009 thanks to ultra low interest rates. The worrying sharp climb made Singapore Government to introduce four rounds of cooling measures, the last one seen in January 2011. Up to now, Singapore property market is still experiencing price increases, but slower than it was a year ago.

Common sense also says property prices will most probably fall next year. There are many factors which would pressure prices downwards:

1) There is a huge supply of 50,000 private residential units are coming in from now to 2015. Increase in supply is not supportive for prices.

2) Immigration policy is getting tighter and PR approval numbers are in declining trend. Decrease in demand is also not supportive for prices.

3) HDB was building 8,000 units per year until 2010. Due to severe shortage and public cry, they are now building 25,000 units per year in 2011 and 2012.

4) Tighter Employment Pass rules are kicking in. Less foreigners mean less rent demand. Combine it with extra supply competing for the rental demand, prices would probably be under pressure.

5) Global economic printed money party will end sooner or later with a slow global growth or even another global recession.

6) And interest rates in the near future can only go up from current near zero rates. And they may potentially go higher rates than normal 4-5% after this long, artificial zero interest rate period.

See also our recent articles:
[1] - Home prices to fall by 8-10%: UOB Kay Hian

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