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My feel - no, I don't think so. I've been a bear on property ever since 2007 and I've looked like a complete fool for 4.5 years. So now my view is that it's just gonna go up, up and away into the sky! Big Grin

The Straits Times
Nov 27, 2011
Will S'pore property market soften?

Report predicts 30% fall in home prices on gloomy global outlook, shrinking demand and oversupply

By Esther Teo

Property has been enjoying a boom like no other in the past two years but if Standard Chartered's experts are right, the good times are coming to an end.

The bank's analysts have turned markedly bearish, with a report predicting residential rents and prices plunging 30 per cent over the next three years.

This will be a painful reversal given that prices surged 18 per cent last year - as Singapore bounced back from the global financial crisis - and a further 6 per cent in the first nine months of this year.

Stanchart sees problems ahead, including slower population growth due to stricter immigration policies and the unprecedented supply of completed homes coming onstream.

Rock-bottom interest rates could also edge up from 2013, further dampening the market.

The debt crisis in Europe and concerns of a severe downturn in China could also have a significant impact on demand and prices.

After four rounds of cooling measures since September 2009, the Urban Redevelopment Authority (URA) has found price gains moderating for eight consecutive quarters.

They inched up just 1.3 per cent from the second quarter to the three months to Sept 30.

Another report - from DTZ Research - noted that transaction volumes dropped 25 per cent in the third quarter as global uncertainty and stock market volatility took their toll on sentiment.

So with all asset classes said to move in cycles - the classic boom and bust scenario - is the Singapore property market headed for a sustained downcycle and a correction in prices?

The Sunday Times looks at the factors at play:

Economic outlook

The euro zone crisis is one of the big factors determining where the property market heads, experts note.

Singapore's economy, buffeted by global weakness and uncertainty, is expected to grow at a sluggish 1 per cent to 3 per cent next year but that could worsen if Europe's woes escalate or a full-blown financial crisis erupts.

Experts add that while any contraction in the global economy will hurt Singapore, the extent remains unknown as the European crisis plays out in slow motion.

There are also other mitigating factors in play.

'Property markets go through cycles, just like economies. Only if

you are in an emerging market where there is a long period of strong economic growth, might you have a long property market upcycle', said DTZ's head of Asia-Pacific research Chua Chor Hoon.

Employment and businesses are affected when the economy contracts so this will affect buying sentiment and the ability to buy homes.

Prices will fall if the major global economies deteriorate as Singapore's economic growth will be affected, she added.

DBS economist Irvin Seah said slowing economic growth typically places a heightened risk of depreciating asset values.

But housing demand in Singapore has remained in good shape as unemployment remains low with wages continuing to rise.

The local property market is also known to be fairly resilient, experiencing just a short blip during the global financial crisis before a sharp rebound at the end of 2009, Mr Seah noted.

However, he highlighted the scenario of a hard landing in China - Singapore's largest export market - as possibly impacting the market most severely.

But the risk of a hard landing in China is 'moderate' and not big enough to warrant concern as yet.

Chesterton Suntec International research head Colin Tan noted that a recession coupled with job losses is likely to drag prices down.

'The moment when potential buyers feel insecure about their future source of income is when they pull back from buying or begin to divest,' he said.

In a downturn, foreign capital could also become defensive and pull back from investing overseas, some experts say.

On the other hand, while another global crisis might also dampen sentiment, Mr Tan noted it might lead to more money being pumped into the markets as governments act to salvage their economies.

Already, there is talk of a third round of quantitative easing by the United States Federal Reserve.

These high levels of liquidity flooding the market might find their way to Asia and continue to support property prices.

Interest rates

Low interest rates that are making mortgages far more affordable have also helped to support the housing market.

And with the United States Federal Reserve pledging to keep rates low until mid-2013, rates here are also likely to remain flat.

However, Stanchart property analysts say that low borrowing costs are not enough to sustain the market.

The increase in the public housing income ceiling and the lower pricing of new HDB flats - expected to siphon demand from the private sector - should still lead to price falls.

What more then if rates rise, likely around mid-2013 if the US economy gets back into shape.

Private home buyers are estimated to spend more than 38 per cent of their monthly gross income on mortgage repayments even though rates are only at 1.1 per cent, the report noted.

This is slightly higher than the Government's target of 30 per cent to 34 per cent. 'If interest rates normalise to the 10-year average of 4 per cent, we estimate the proportion of income spent on mortgage repayments to rise to 50 per cent,' it added.

Rising interest rates are expected to reduce affordability and trim market demand, possibly leading to prices dipping as well.

However, as some experts note, any decision by the US Fed to raise rates will mean that its economy

is finally on the mend and that could signal that the global economy is out of the doldrums, which is good news for investors.

Slower population growth

Tighter immigration policies have recently been introduced in response to unhappiness over strained infrastructure and congestion.

The Stanchart report noted that population growth is expected to be halved to 1.5 per cent to 2 per cent for the next three to five years as the Government looks to encourage productivity gains and reduce its reliance on foreign workers.

But this reduction might have a knock-on effect on leasing demand and rents, especially with foreigners - including permanent residents - making up 37 per cent of the population.

Experts note that if demand from tenants falls, rents and correspondingly yields - which are already low at 2.6 per cent to 3 per cent - will fall, with prices following eventually.

But AmFraser Securities equity analyst Lau Wei Chong noted that although the intake of foreigners has slowed, the Government maintains its open door policy to talent, which will see the population continue growing. This continued influx will mitigate any sharp fall in property prices, he said.


The large number of completed units from the bumper supply of state land releases raises the question of whether these homes can be absorbed by the market.

The report noted that the number of homes to be launched for sale is similar to that in 2000, when prices plummeted 20 per cent.

As of the third quarter, 37,400 homes are in the pipeline seeking the required pre-requisite conditions to be launched.

This is similar to the 36,400 units in the first quarter of 2008 and the 37,500 units in the second quarter of 2000.

Prices fell 25 per cent in 2009 and 18 per cent in 2001, the report pointed out.

Completions are also expected to peak in 2015 with a staggering 47,000 units built.

This is almost three times the number of private homes developers sold last year, which was itself a record.

The unprecedented supply of new HDB flats - 50,000 in total for this year and next - will also divert buying demand from the private sector.

However, Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, noted that the population has expanded by about 2.8 per cent a year over the past 10 years while the number of completed homes has increased by 2.1 per cent a year.

Given the way the growing population has outpaced the housing stock, this has led to a backlog of demand for homes.

'If the economic crisis is not too severe, this will help to mitigate the sharpness of any price correction,' Dr Chua added.
Thank you for sharing this Musicwhiz - I too look like a twit for believing that Singapore property prices could not go up any further - if only I had gone in when I first said that!,

Just a thought ............ wouldn't this be a good time for Singapore to actually raise interest rates? The Singie Dollar has taken a bit of a bashing in the last 3 months (vs. the US$), growth data is still good ........... and yet property prices just keep going up (the Bedok article shared on VB's earlier this week is a darn good example of this). I can't help feeling the key driver for continually rising property prices is the historically low interest rates we are seeing. If the cost of borrowing went up, I believe that would have a more marked impact than the Government's attempted cooling measures.

I believe Singapore's Central Bank MAS manages monetary policy by tweaking exchange rates, rather than interest rates. So for them to directly raise interest rates seems out of the question.

In fact, Singapore takes its cue from US Federal Policy (yes the country which has a mountain of debt), and they seem intent on keeping rates low till at least 2013! Tongue
Thanks MW,

All noted and all recognised ............. but the property sector in the US is generally sick ........... while Singapore's is, as we all know, quite the opposite (at the moment any rate). If the Singapore Government is serious about bring real estate prices to heel then surely they need to nudge up the cost of borrowing.
Sadly, methinks the Govt is not interested in making property more afforable.

Higher prices means higher property taxes - more money for the Govt!
我觉得212年,至少以后六个月是2008年以来最困难的时期。这个金融危机变成了经济危机现在变成了政治危机。周秘书长刚才也谈到了政治问题,起源是金融危机出现以后,各个国家的政府把这个看成是一个救市,经济要恢复就来刺激,是这样看问题的,并没有思考危机出现背后的深层次问题。为什么会出现这样的问题,因为这一代领导人是牛市当中产生的,牛市的领导在危机当中应对起来很困难,所以刺激就变成了唯一手段。2009年、2010年经济的恢复是一个假象,并没有解决结构性的问题,经济走向繁荣的基础是没有的,金融市场 已经看到了这一点,所以不愿意陪着政府玩儿,政府这几年都是靠借钱达到它的目的,金融市场认为政府这样借钱是不可持续的,所以金融市场和政府的博弈就形成了政治危机。
Erm, my Chinese not very the powderful. Can translate and summarize, please? Tongue
here u go:

Quote:November 11, 2011
(This topic is what we will see next year for big things. Just weeks Secretary-General has raised the issue of debt in Europe.)
I think 212 years, at least since the 2008 six months after the most difficult time. The financial crisis into an economic crisis has now become a political crisis. Zhou Secretary-General also talked about political problems have originated after the financial crisis, the Government of each country as a rescue, to stimulate the economy to resume, is the issue this way, and not thinking behind the crisis deep-seated problems. Why is there such a problem, because this generation of leaders is to produce a bull market, bull market leadership in the midst of a crisis response it is very difficult, so it becomes the only means to stimulate. 2009, 2010, economic recovery is an illusion, and does not solve the structural problems, economic prosperity is based not, financial markets have seen this, so do not want to stay with the government to play, these government years is to achieve its purpose by borrowing money, borrow money from financial markets so that the government is not sustainable, so the financial markets and the government formed a political crisis on the game.

I think that Europe is now in recession, and this recession is not forecast the market was negative 0.5 this figure is likely to decline in Europe a few percentage points, similar to the situation in the United States in 2008 or 1998, the situation in Asia. Because there is no way to operate the banking system, banking system, there are a large number of bonds, bank debt after the devaluation on the lack of capital, and now can not borrow money between banks, so we all went to the central bank to borrow money, this is unlikely to support the banking system economic development, so the credit crisis is inevitable. Substantial decline in Europe, is to solve the debt crisis is not resolved all inevitable. To solve the debt crisis is the only way to go a substantial reduction of expenditure, expenditure cuts will cause a drop in demand. This recession is a process must be taken in Europe, Europe's problems is the problem of declining standards of living to be, politically, this is very difficult. Europe, which is lost in the global competitiveness, to maintain their standard of living is supported by government borrowing, the financial bubble era in the economic operation of such a model can be maintained for several years, the market came to a realization that Europe must accept the standard of living decline in (real).

Germany ten years ago to see this problem, Germany dropped its own substantial salaries, social welfare, we have recently seen a decline in wages in Ireland are 20% done, which is in line of other countries should, in order to make Europe economy go forward. Short term, the European economic recession is inevitable in the long run if you can not accept falling living standards, will only delay the crisis. Why is politics so important that only makes people trust a leader, it may reach such a result. After a few months, the debt crisis in Europe is no way to delay (critical moment). Ambassador Zhou Wenzhong just mentioned the issue of government bonds in Italy, 6% a year, ten years is 6.7%, the interest is false, is now the European Central Bank in support of this market, but the finance function is not available, the total debt of Italy scale was 1.9 trillion euros, if not the size of the financing of this country will be ringing off the hook for. After a few months we will see great changes in Italy, how they like to deal with this matter.

Now we think that the U.S. may become a little better, in fact, America's problem is not resolved, the crisis of 2008, the United States with the use of taxpayer money to save the financial system, it is Europe's financial system is relatively stable, but the consequences of doing so is government debt is very high, the government can not afford to maintain fiscal spending, so cut, a cut on the intensification of social contradictions, contradictions in American society is more severe than in Europe. United States is now one-tenth of the family house is close to the bank, the government reported unemployment figure is 9%, if the job count nearly 19 percent, the poverty rate has now more than 15%. In such a difficult economic situation, this year's medical costs rose by 9%. Intensification of social conflicts is, is the U.S. presidential election next year, next year the U.S. will be very much negative news, negative news is not necessarily a temporary financial crisis, bad news is mainly caused by social conflict, and now we see the movement of the U.S. occupation of Wall Street This is just the beginning, 30 million unemployed protest movement may be very large support, the United States finally come out from the crisis, and ultimately to the formation of new political forces to change the state of the system. America's core problem is the problem of unfair distribution of the bourgeoisie and the shareholders, the owners of real estate, now the owners of real estate, now turned into a negative bourgeoisie the bourgeoisie, the stock market is lower than a decade ago, the bourgeoisie did not do any good, formed a privileged class, using the legal system to make money for themselves, it is the main benefit is the allocation of lawyers, doctors, bankers, it is not the system of free competition in generation, is made by the system to protect high-income, if This system does not change, not stability of American society, why is it on the whole have a lot of political changes, the United States will have a new round of economic growth, so next year is very volatile year in the United States.

The third event, China's real estate bubble is burst. Last year, I think real estate will be dragged down in 2012, the first half of this year I changed my opinion, in the second half will fall, I saw the national monetary policy will not loose. Did not fall for the first half of the original developers use is to give him the financing of other sectors, such as logistics, construction companies, any business and real estate developers have become his finance platform, because the real estate industry that until recently, the poor sales, tight credit situation Zhang maintained to this day. But today I see that the industry has lent him money to take over, can not afford, so to a sharp decline in real estate is inevitable.

Wu said China just to restructuring the economy, restructuring of China's economy is beginning to adjust real estate, house prices and household income distribution, the government's core indicators, the high prices the government money, the people have no money, the economy can not be balanced. Real estate bubble burst, the Chinese economy in the long run is a good thing, it needs the same impact as tax cuts, people can not afford to fear the house will not dare to spend money, if house prices fall later on national economy is a good thing. Therefore, through the more difficult later than six months after the Chinese economy is still good. China's economic might is the real estate in recent years due to China's manufacturing industry is big but not strong, how the problem caused by everyone trying to expand the manufacturing, use this platform to do financing, financing the future to engage in real estate, China has a special phenomenon, China's steel ex-factory price is lower than the selling price, how could we have done trading losses, the steel company to pour money in the bank of steel, he and the developer did usury, and I observed Many logistics companies engaged in steel, they are duplicated to the bank's mortgage collateral, Piandai. This is a serious problem, the Chinese real estate enterprises have closed down the next few months, when consider how the Chinese government, is not to save it? If you save it for the long term, China is negative.

Because once again confirmed that the model is kidnapped Chinese government to make money, kidnapping, bank, as long as the government kidnapping, kidnapping, bank is not quite, this economic model is not broken, there is no way out of this economy, we are engaged in financing, how this economy forward to go. It would have caused the collapse of the financial, is not caused by industrial, industrial collapse may soon change hands, the financial problems above can spend a little time to resolve, so the impact on the economy is limited, the real economy can still functioning. Even if the factory closed down, a shortage of blue-collar workers in China, so the economic slow down that no political consequences, laid-off workers find jobs is relatively easy, and now China is college students find jobs, students find a job is because the Chinese model of economic growth, banks engage in stimulating, growth is the plant site and do not need so many blue-collar, service industries do not need so much refinement, all construction sites and factories, if engaged in a repeated set is inflation, then students still can not find work, a vicious cycle. China in the next six months as long as the wound crossing the hurdle, and then the world economy is not good, hard-working Chinese people, this year's per capita GDP was $ 5,000, only one in nine developed countries, less than half the world average, I like the whole world turned to the Chinese people who are not so hard, and China is 24 hours on site seven days a do my house there is a site I am very clear, there is no such world. Many people say that Chinese people difficult to manage, many people, this argument is wrong. Chinese people to the Government what they want, the world no nation so well pipe. Chinese government as long as the wound and rescue anyone who do so, ulterior motives, he is up to the real estate speculation, is to save themselves, the government as long as six months later the wound came, no matter Western economic good future, China's future is very bright.
(In November 11 '2011 new financial summit: China and the world "speech)
It's always LOL a refeshing break once in a while, if one has time, to read these robot translations.
(28-11-2011, 01:13 AM)Musicwhiz Wrote: [ -> ]Sadly, methinks the Govt is not interested in making property more afforable.

Higher prices means higher property taxes - more money for the Govt!

Hahaha...I like your last statement Smile

Anyway, in my opinion at the current climate, I believe we will see a 10% price correction at the very least since country GDP has been revised downwards and the fact that the residential property figures from URA & CBS have not been very encouraging amidst the broader global market challenges.