We will be welcoming year 2014 real soon, one of the regular topic of discussion among the friends and relatives was the property price in Singapore; particularly the residential sector. This topic has its implication about our live, our wealth and somewhat politics too.
The following were some of the extras which I took note about (keep in mind they were the view by the authors/analyst and/or the organizations)
27 Sep 2013 by Barclays – “Residential property prices in the wealthy island nation of Singapore could be headed for a sizable correction of up to 20 percent by 2015, according to Barclays.” On top of that, “The bank forecasts prices will remain flat in 2013, before falling 5 percent in 2014 and another 5-15 percent in 2015.”
7 Oct 2013 by DBS Asian Insight – “We expect a 5% contraction in private home prices annually over the next two-to-three years as vacancies rise to a projected 8%-to-9%. Primary demand could also contract by 20%-to-30% this year to 17,000-19,000. Meanwhile, prospects of rising positive real mortgage rates in the medium term are also likely to keep investment demand in check. Within the retail real estate segment, low unemployment, sustainable domestic consumption and decelerating inflation provide a stable outlook.”
28 Oct 2013 The Business Times – “No oversupply in property market: consultant” Alan Cheong, head of research and consultancy at Savills Singapore, made his case last Friday at Carlton Hotel marking Singapore Management University’s (SMU) homecoming celebrations for its Master of Science in Applied Finance programme.
“I think barring external shocks, property prices, residential prices will stay elevated,” he said. There has been a housing shortage since 2006, he said, presenting calculations done by him and several SMU professors and researchers. The number of units in deficit in the market has risen from around 5,174 units in 2006 to some 142,175 units in 2011.
Even when the full expected supply pipeline comes on board in 2015, Mr Cheong still forecasts a deficit of around 3,765 units, which will support prices.
He added that even as population growth in Singapore between last June and this June was its lowest in nine years at 1.6 per cent, this will still compound to about 7.1 million people over the next 17 years.
From a technical viewpoint, he believes the market is not overbought.
Using a benchmark of 80 for the Relative Strength Index of the Urban Redevelopment Authority (URA) Property Price Index, he said current property prices are not at levels before the collapse of Lehman Brothers in September 2008, nor are they at the extreme peaks seen here in 1980 and 1996.
Mr Cheong also urged investors not to short-sell their homes. The upside for going long on one’s home is about 156 per cent, versus about 24.8 per cent from going short.
13 Nov 2013 article in Singapore Business Review – “According to OCBC Investment Research, barring a macro crisis, it does not believe headline prices will correct excessively (>20%) in 2014.”
This is due to three reasons.
“1) The direct impact of a physical oversupply (of homes which are already sold) is first on vacancy rates and subsequently on rental prices.
While falling rents will pressure home prices, we do not see many home-owners force-selling into a softening market given that a negative rental carry is the norm in Singapore historically and that the average individual balance sheet remains fairly benign.
2) The level of unsold pipeline held by developers (which forms the primary supply) is currently at 36k units. This is lower than the 10-year historical average of 43k units and is not overly onerous.
While developers will likely ease prices ahead to move inventory, a fire-sale situation is unlikely to ensue given relatively strong balance sheets.
3) Finally, we believe the data currently point to a fairly high price elasticity of demand. That is, significant numbers of buyers will come into the market at every incremental price dip.
This is illustrated when CapitaLand introduced discounts at its 1715-unit d’Leedon in 1Q13 and subsequently saw 543 more units sold by 3Q13.”
Over FY14, OCBC’s forecast for mass-market residential prices is a dip of 5%-15% and 0%-10% fall for high-end residential prices.
5 Dec 2013 article from CNBC – “Demand for Singapore real estate will fall next year, according to a report from global accountancy firm PricewaterhouseCoopers, which said the market slipped four places in its 2014 ranking of property markets.
According to PwC’s Emerging Trends in Real Estate Asia Pacific forecast, published in conjunction with the Urban Land Institute, concerns around oversupply in some Singapore property sectors have damped appetite.
“Singapore slipped off the top five spots for the first time since the publication first started in 2007,” said Choo Eng Beng, real estate leader at PwC.”
Choo said contradicting factors were creating a mixed outlook for Singapore’s real estate market.
“On the one hand, investing in real estate is getting more expensive due to the expected higher interest rates, compressed capitalization rates [which refer to the rate of return on a property based on its expected income] and tighter regulations. On the other hand some see room for better returns with low vacancy rates and potential for higher rentals,” he said.
Out of the above 5 articles, 2 were pointing to the pessimistic side and 1 was still optimistic but the other 2 have somewhat presented the mixed view.
In my personal opinion, for your own stay, you should not have too much of the concern since a roof over the head the utmost important to you and family. To the investors, building up your war chest and have a long term investment perspective are the better strategies than trying to time the market accurately; as we all know the market will not give you “accurate feedback”.
Towards our Financially Savvy Journey !
Wei Teck – property coach
Dec 2013
proplaunchsg@gmail.com
www.proplaunchsg.com
www.blissfulproperty.com
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