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Should Singapore follow China for property market ‘warming’?

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The property market of Singapore for 2014 has been quite unpredictable. Read here: Singapore property, prices continuously declining into 2015  Sentiment continue to be dampened and the major reason was due to the government’s cooling measures. According to Chia Boon Kuah, the president of Singapore’s Real Estate Developers’ Association (REDAS), total transaction volume for 2014 is likely to be half of 2013. From around 18,000 units in 2013 to just under 9,000 units for 2014. Added to this would be the declining overall private home prices for the last four consecutive quarters. With a total of another 68,000 completed new residential units within the next few years, this will cause the vacancy rate to head towards 10 percent from current 7%. With more available units, the pressure on the market will increase even further. This is not good for the economy because a quarter of the top 20 listed companies in Singapore are property or property related firms. Due to all the cooling measures, the genuine home buyers among Singaporeans are still thinking instead of buying.

In other words, demand is still there, just like Malaysia. However, with the negative sentiment, the braver ones become worried and the worried ones become passive. Passive ones? They tell everyone ‘don’t buy’. That’s the worst actually. The developers built based on perceived demand but with the demand now ‘waiting’, the total supply suddenly shoots up versus the demand. With this background, would it be prudent for the Singaporean government to start relaxing some of the measures? Just look at what China has been doing recently for it’s cooled property market. Read here: China’s Property Market Rescue Package Deployed 

Knight Frank Singapore executive chairman said that the government is definitely aware that real estate is a big part of Singapore’s collective wealth. It is unlikely to allow this wealth to be threatened. However, if the prices are not stopped from going up too fast, the salaries would never catch up. As it is today, the SIngapore property market is already said to be severely unaffordable by Demographia.

Personally, I think the Singaporean government is still doing a good job. Prices have declined due to the cooling measures but it is nowhere near the crazy increases of past few years. In fact the negative sentiment amongst the potential buyers would not be there forever. Once prices dropped to a level they are comfortable and the transactions start trending up, they will see this increasing sign and abandon their ‘wait-and-see’ attitude. A continuous moderation of property prices would definitely be much better than bubble building to an unsustainable level and under the worst case scenario, bursts! Don’t try to guess how much prices would go down before entering the market to buy a home sweet home. Instead think of what would be a reasonable price versus your current pay and buy one. Staying in your own property means you start paying for an asset and not rental which is just an expense. Happy waiting or buying.

written on 30 Nov 2014

Next suggested article: Second behind Hong Kong is still pretty amazing, really.

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