Singapore’s Property Market Headed Towards a Perfect Storm?

 

 

Gauri Bhatia, On Monday 30 May 2011, 10:39 SGT

When a country registers a 15 percent growth rate, as Singapore did last year, there is bound to be a lot of the feel good factor going around. And Singapore's housing market is cashing in on this big time -- prices have rebounded 50 percent in just two years, according to the Urban Redevelopment Authority, and cooling measures by the government have done little to calm them.

At a recent real estate conference organized by National University of Singapore, which explored the theme "Will the boom never end," Chua Chor Hoon, Head of South East Asia Research at property consultancy DTZ, said the Singapore residential market is not likely to decline much because of strong economic growth, but she also outlined a worst-case scenario, which could unfold as early as 2013-2014. "If all the ingredients come together it will make a perfect storm."

These ingredients include falling demand, more supply and higher interest rates all kicking in together.

Interest rates in Singapore are currently at record lows because lending rates in the city-state track U.S. monetary policy. That's allowed some home buyers to pay less than one percent in the first year of their loans, says Chua. Most analysts, however, expect interest rates to begin moving higher later this year.

Second, in 2014 an unprecedented number of housing units are expected to enter the market. According to the URA's latest quarterly report, 32,359 units will be completed over 2013 and 2014 that is 85 percent more than the 17,501 units expected over 2011 and 2012.

Add to this the fact that Singapore's price-to-rent ratio has increased from 20 in 2009, during the financial crisis, to 25 currently, according to URA and DTZ research. That means it will take 25 years for a homebuyer to recover, through rents, what he paid for the house. As a result, Chua says, people investing in this market often have a short-term view looking to "flip" the property for capital gains.

Foreign buyers are also helping boost Singapore's property market, especially at the high end. According to DTZ's latest report, foreign buyers of private homes in the first quarter of 2011 touched a record high of 16 percent. But Chua points out that this could drop, if the government further tightens immigration rules.

"Local concerns about high housing prices and the influx of foreigners that were magnified during the recent General Election will be a catalyst for the review of immigration and housing policies, which could dampen demand in the residential market in the coming months, " Chua wrote in a report.

While growth forecasts for Singapore over the next five years at 4-6 percent will support the property market says Chua, one cannot rule out another unforeseen external crisis like the financial meltdown, which could also lead to a market crash. While the bulls might find it hard to believe that something like that can happen again, another speaker at the same conference had this to say: "We always think this time it will be different, but it never is."

This article first appeared on CNBC.com on 29 May 2011.

國大房地產價格指數顯示 私宅轉售價4月續升

(2011-05-31)

● 苗豐恬 報道 　　由新加坡國立大學所追蹤的新加坡房地產價格指數（簡稱SRPI）顯示，本地轉售私宅價格在4月份繼續上升，較一個月前上漲了1％。 　　其中，中央區轉售私宅價格的走勢止跌回升，上漲了0.8％，非中央區則收窄了漲幅，上漲1.1％。 　　相比之下，經修訂後的3月份轉售私宅價格指數上漲了0.2％，中央區下滑了2.2％，非中央區上漲2.1％。 　　這也是今年1月中政府推出新一輪降溫措施之後，所出現的最高月比漲幅。 　　分析師認為，盡管轉售私宅價格在4月份的走勢比一個月前來得高，但若與去年同期相比，仍處萎縮勢頭。 　　高緯物業亞太區研究部高級經理王伽勝認為，私宅轉售價格4月較3月份上漲了一個百分點，這是繼2月和3月漲幅走勢不斷萎縮之後所發生的，並不意味政府的降溫措施不奏效。 　　王伽勝說：“然而，這代表著買家重新變得樂觀，尤其是那些在場邊觀望了一陣子、花了一段時間消化政府降溫措施再作決定的買家。” 　　他也認為，中央區非有地私宅在4月份止跌回升的表現，則反映出高檔房地產市場在2009年大幅調整之後，買氣重燃的現象。 　　然而另一方麵，若從同比的角度來看，本地私宅轉售價格則並沒有加快漲幅的跡象。 　　欣樂國際執行董事麥俊榮說，根據他的計算，本地轉售私宅價格盡管月比漲幅提高，但若一年前相比，漲幅卻繼續收窄。 　　麥俊榮指出，本地轉售私宅整體價格在4月份同比上漲了10.3％，比3月份的12％、2月份的12.6％和1月份的12.8％都來得小。 　　若光看中央區，轉售私宅價格在4月份同比上漲了5.5％，與3月份的8.4％、2月份的10.9％和1月份的9.4％相比，速度已顯著放緩。 　　至於非中央區，4月份轉售私宅價格同比漲幅為14.1％，相比之下，3月份轉售私宅漲幅為14.7％；2月份漲幅為14％，以及1月份同比漲幅為15.4％，在一定範圍內浮動。 　　國大指數追蹤的是一攬子的私人共管公寓項目（全島26個郵區的364個私人共管公寓），但不包括未竣工項目、有集體出售潛能的項目和單位數目少於40的小項目。　 　　展望未來，分析師認為，私宅轉售價的月比漲幅不會繼續提高，而年比漲幅則相信維持在10％到15％之間。 　　王伽勝說：“買家在4月份所顯示出的樂觀情緒，似乎是被積壓的潛在需求被釋放出來，未來幾個月相信不會繼續。” 　 　不過，王伽勝也相信，非有地私宅轉售價接下來幾個月應該會保持平穩，或漲幅少於1％。他認為，盡管私宅市場近期出現“兩極化”現象——即買家願意在同一 個地區內，為獨具創意的新項目多付15％到20％的溢價——但隨著價格攀升到高峰，也有一些買家對價格越來越敏感，轉而購買轉售私宅。 　　麥俊榮說：“整體而言，房價仍在上漲，但已放慢上漲的腳步。在目前的經濟和金融環境的走勢下，私宅價格應該會繼續上揚，預計今年上漲10％至15％之間。” *[e-mail] 《聯合早報》 As supply of new flats is ramped up …  June 1, 2011 Analysts expect COVs and private home prices to fall gradually The flurry of housing announcements in recent days has increased optimism among home-seekers, especially those who have been unsuccessful in their house-hunting efforts. Property analysts who spoke to Today noted, however, that the additional supply and a review of the income ceiling for buyers of new Build-to-Order (BTO) flats will be “no big shake-up”. The impact – including on prices – will instead be gradual, kicking in only when the first of the 25,000 new units pledged by the Government come onstream in two years. For a start, the gap in prices between new and resale units will likely narrow, said SLP International executive director of research and consultancy Nicholas Mak. While the market value of resale flats is likely to remain stable over the next few years, experts expect cash-over-valuation (COV) prices to shrink – as the combined effect of the new measures temper demand for these flats – leading to a 15-per-cent drop in resale prices. Cushman & Wakefield vice-chairman Donald Han believes the COV could even become a thing of the past: “With an increased supply and the adjustment to the income ceiling, it will become a buyer’s market and the COVs may no longer be a component of negotiations.” At the same time, the prices of new BTO flats would likely be unaffected despite the influx. Under the HDB’s current pricing model, the prices of BTO flats are pegged to market prices less Government subsidies. Young couples looking to buy new flats, therefore have no need to hold out on their purchases, said ERA Realty key executive officer Eugene Lim. “It doesn’t mean that if you wait, the prices will come down or the flats will be in better locations. So you should go ahead with your purchase if everything works for you,” he said. Wild cards: Construction costs and interest rate Analysts estimate prices in the private residential market to fall by about 10 per cent in about three years. Said SLP International’s Mr Mak: “A review of the income ceiling will take off a chunk of demand from mass market private properties – those that cost below S$1 million.” If more public housing in the form of executive condominiums and flats under the Design, Build and Sell Scheme are rolled out, demand for mass market private homes may also be affected, said ERA’s Mr Lim. As the prices of resale flats fall, there may also be fewer HDB-dwellers looking to cash in on their homes and upgrade to private properties, analysts noted. The Republic’s economic performance is also a factor as the private market is largely “liquidity-driven”, they added. Chesterton Suntec International’s director and head of research and consultancy Colin Tan said: “Many private property buyers are investors; as we have seen, even the harshest cooling measures imposed by the Government have seen prices continue to climb.” There are two wild cards in the equation though: The higher tempo and sheer number of new flats the Government is seeking to build could create a bottleneck within the construction sector – a point National Development Minister Khaw Boon Wan noted when he revealed a ramp-up in the number of rental flats last Sunday. Shortage of raw materials, for example, could drive up construction costs. The other is the movement of interest rates. Singapore’s record-low interest rates now has allowed some home buyers to pay less than one per cent in the first year of their loans, but that could well change depending on external factors. At a recent real estate conference organised by the National University of Singapore, DTZ head of South-east Asia research Chua Chor Hoon warned of a worst-case scenario: A potential “perfect storm” unfolding in two to three years’ time, should interest rates spike while demand plunges in an abundant market – over 32,000 units will be completed over 2013 and 2014, according to the Urban Redevelopment Authority. Mr Tan noted that it is “not impossible that interest rates remain low” as the United States continue to struggle economically. If that happens, it could also create “ghost towns” – in the event where supply outstrips demand – where people hold on to vacant units because the cost of doing so is low. Source : Today – 1 Jun 2011