Just read a piece of news in Bloomberg which said that the total units up for auction in 2014 for Singapore was 10 times higher than 2013. Before you worry, please do not worry, the total number is just 118, most probably those who bought very much later than the earlier batch. Thus, as soon as the rental market slows due to supply increase and demand reduction, these later buyers may not be able to hold on to the unit. Note, despite 10 times increase, the number units are definitely manageable and there should not be a mistake that this is a crisis. Not yet anyway. Then, the report stated that there were 100 bargain hunters who stood side by side inside a room for 50. Hey, double the number of seats available. It meant that people love bargains. More importantly, it meant that if the price is right, the demand will show its might.
The report also said that decline in price has started in 2014, after a 5 year continuous climb. That meant that prices started to increase beginning in 2009, right after the mortgage crisis in 2008. During this 5 year boom, prices climbed 40 percent, mainly because it’s easy to buy and foreign demand was high. Later, total debt repayments were capped at 60% by the Singapore government and this cooled the market. These days, hiring a foreigner is a tough business and this has slowed their numbers tremendously and with them, the rental market. Singapore’s second largest developer City Developments Ltd said that fire-sale may start with the falling rents, especially the high end ones. I think this is very true because some of these expatriates are now based in Iskandar instead. Bigger homes, smaller rentals. Overall though only 1 percent of mortgages were late in payments.
Based on all the numbers, it does not seem that prices would crash. Singapore government is considered a pro-active one and would have been able to take measures if the market is indeed in trouble. Just look at China which also would not allow its property market to collapse. It has started warming up measures. Read here: Should Singapore follow China for property market ‘warming’? Buying property is a long term investment. If the buyers are thinking along this line and is ready to hold during slow times, it would always be a managed risk. Objectively, do we seriously believe Singapore would have a slow down forever?
written on 28 Jan 2015
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