Thursday, January 3, 2013

Will property prices go up or down in 2013?

Most analysts predicted a price decline for 2012 and they seem to only differ in the magnitude of decline. But after rounds of property cooling measures, slowing economy and uncertainty in Europe, cheap credit and printed money fueled Singapore property bubble proves one common aspect of all asset bubbles: Asset bubbles do not end until the cheap and easy credit fueling them ends.

Here's what Mr. Propwise says in Singapore Property Weekly (issue 84) :

The question now hanging on most people’s minds is now: will property prices continue to rise in 2013? Certainly the re-acceleration of the PPI starting from the second quarter of 2012 was unexpected, but it should be noted that the 2.8% property price increase in 2012 is already a deceleration from the 5.9% in 2011 and 17.6% in 2012.

I believe that we will only see significant levels of price declines if there is an external crisis to cause a sense of panic, which we had in each of the previous three declines (e.g. Asian Crisis, Dotcom Bubble, Global Financial Crisis). This is because the abundant global liquidity situation and sustained low interest rates will continue to support Singapore property prices in the meantime.

The Straits Times Index (STI) has recovered to 3,167 points as of end December 2012, up 17.8% for the year and 3.6% versus the last quarter. If you believe that the stock market is a leading indicator for the property market, then we could see continued support for property prices in the coming quarters.

Singapore private property and HDB's resale prices up in Q4 2012. The overall private residential property index rose from 208.2 points in 3rd Quarter 2012 to 211.9 points in 4th Quarter 2012. This translates into an increase of 1.8%, compared to the 0.6% increase in the previous quarter. HDB Resale Price Index jumped to 202.9, a 2.5% increase over 3rd Quarter 2012. This is on the top of 2% quarter-on-quarter jump in Q3 2014. The increase to 202.9 in Q4 2012 also points to a 6.56% year-on-year increase compare to last year Q4, when index was at 190.4.

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