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.

国大房地产价格指数显示 私宅转售价4月续升

(2011-05-31)

● 苗丰恬 报道 　　由新加坡国立大学所追踪的新加坡房地产价格指数（简称SRPI）显示，本地转售私宅价格在4月份继续上升，较一个月前上涨了1％。 　　其中，中央区转售私宅价格的走势止跌回升，上涨了0.8％，非中央区则收窄了涨幅，上涨1.1％。 　　相比之下，经修订后的3月份转售私宅价格指数上涨了0.2％，中央区下滑了2.2％，非中央区上涨2.1％。 　　这也是今年1月中政府推出新一轮降温措施之后，所出现的最高月比涨幅。 　　分析师认为，尽管转售私宅价格在4月份的走势比一个月前来得高，但若与去年同期相比，仍处萎缩势头。 　　高纬物业亚太区研究部高级经理王伽胜认为，私宅转售价格4月较3月份上涨了一个百分点，这是继2月和3月涨幅走势不断萎缩之后所发生的，并不意味政府的降温措施不奏效。 　　王伽胜说：“然而，这代表着买家重新变得乐观，尤其是那些在场边观望了一阵子、花了一段时间消化政府降温措施再作决定的买家。” 　　他也认为，中央区非有地私宅在4月份止跌回升的表现，则反映出高档房地产市场在2009年大幅调整之后，买气重燃的现象。 　　然而另一方面，若从同比的角度来看，本地私宅转售价格则并没有加快涨幅的迹象。 　　欣乐国际执行董事麦俊荣说，根据他的计算，本地转售私宅价格尽管月比涨幅提高，但若一年前相比，涨幅却继续收窄。 　　麦俊荣指出，本地转售私宅整体价格在4月份同比上涨了10.3％，比3月份的12％、2月份的12.6％和1月份的12.8％都来得小。 　　若光看中央区，转售私宅价格在4月份同比上涨了5.5％，与3月份的8.4％、2月份的10.9％和1月份的9.4％相比，速度已显著放缓。 　　至于非中央区，4月份转售私宅价格同比涨幅为14.1％，相比之下，3月份转售私宅涨幅为14.7％；2月份涨幅为14％，以及1月份同比涨幅为15.4％，在一定范围内浮动。 　　国大指数追踪的是一揽子的私人共管公寓项目（全岛26个邮区的364个私人共管公寓），但不包括未竣工项目、有集体出售潜能的项目和单位数目少于40的小项目。　 　　展望未来，分析师认为，私宅转售价的月比涨幅不会继续提高，而年比涨幅则相信维持在10％到15％之间。 　　王伽胜说：“买家在4月份所显示出的乐观情绪，似乎是被积压的潜在需求被释放出来，未来几个月相信不会继续。” 　 　不过，王伽胜也相信，非有地私宅转售价接下来几个月应该会保持平稳，或涨幅少于1％。他认为，尽管私宅市场近期出现“两极化”现象——即买家愿意在同一 个地区内，为独具创意的新项目多付15％到20％的溢价——但随着价格攀升到高峰，也有一些买家对价格越来越敏感，转而购买转售私宅。 　　麦俊荣说：“整体而言，房价仍在上涨，但已放慢上涨的脚步。在目前的经济和金融环境的走势下，私宅价格应该会继续上扬，预计今年上涨10％至15％之间。” *[e-mail] 《联合早报》 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