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Home | Real Estate Blog | Articles | Video | Forum | Success Goal | 中文
Singapore Real Estate Market Review December 2010
Major economies of the world have put considerable focus on the growth of the economies in order to create employment. These measures have resulted to noticeable economic recovery albeit slow. The property market has been the driver of this economic growth in most of these economics, in Britain the property market has been strong making it a preferred investor’s destination. Foreign investors now contribute more than 70% of all sales made in London and over 50% in surrounding areas making foreigners an important group in driving the economy out of recession. The crucial role these investors play can be seen from the fact that this is the only market where although prices have reduced the rentals have been rising due to the low supply of rental flats in London and surrounding areas. This scenario is replicated in markets that have accommodated foreign buyers.
The real estate market has seen a lot of activity this year than many previous years but the prices had gone up to the highest levels seen in the last three years and following the government measures introduced at the beginning of September the prices have gone north even at a time when the demand is high. The government has initiated programs to ensure that the supply is increased to meet the pent-up demand.
The residential market say prices reach a record high by the 2Q but now the activity has slowed and very little activity has been recorded as far as increase in prices is concerned. The demand has drastically reduced driven by the market sentiments that were dampened after the intervention by the government. It can be said that speculators played a key role in ensuring that the prices remained high for most of the first 3Q.
The activity has slowed down and almost hit the lock bottom as the market watchers still analyze the effect of the measures but the implications now are clearer as ever; the prices have gone north and chances of the property market in Singapore overheating have evaporated but now in its wake left worried about inflation and the fright of capital as investors head to markets that are performing well such as Britain.
The government measure to increase the holding period from one year to three years for property owners for them to qualify for sellers stamp duty reprieve has ensured that the owners do not sell the properties as they intended. This means that the sellers would pay stamp duty if they sell the units within three after purchase. The minimum cash payment was increase to 10% meaning buyers have to raise more money from individual sources before qualifying for a loan from banks. The amount an individual can raise was put up to 30% in order to ensure that savings made is utilized in the purchase of the home. The loan to valuation ratio was capped at 70% a reduction from 80% before.
The middle class was also the focus of the measures as the government moved to ensure that the HDB public housing only benefit the intended individuals and not for profit making purposes as seen in the first three quarters of 2010. This class was allowed to purchase the DBSS flats and was granted a $30,000 CPT housing grant ensuring that they had an edge over other investors who could not qualify for the grant.
In order to meet the pent-up demand the authorities increased the supply of units built by HDB by launching more units and decreasing the time it would take to compete the intended 16,000 units for this year and Build-To-Order flats respectively. Other measures introduced that had an effect on both sides of demand and supply were, increasing the minimum occupational period to five years for the public housing sector and disallowed ownership of HDB flats and other private properties concurrently.
Although rents have been high to ensure that investors still can finance the loans from rent proceeds, these measures have made it almost impossible for investors to buy multiple units at the same time, thus decreasing the possible demand that could have been created as investors purchase multiple units. The government has also formed a shield for fist time buyers to participate in the market as prices have considerable gone north this would ensure that the units become affordable and they would be able to buy first homes.
The market managed to move more than 3,400 units in the 3Q a marginal decrease from the higher figure of 4,033 sold in 2Q this is after the government introduced cooling measures midway the 3Q. In the 1Q the market saw 4,380 move hands, from these figures the market had made progress in achieving the target of 14,000 units but the inflationary pressures needed to be tacked. The government pointed at property price increase as the main cause of the inflation.
While the property price decline has been experienced even in the past one and half months the market is still showing resilience and the prices will be stable in the remaining part of 2010 and beginning of 2011. However most analysts have pointed to the emerging trend where buyers have shifted focus to the high end market and smaller units in areas that are strategically located such as CCR. This trend could continue even in 2011 as this segment has not had price decline.
Much of the focus can now been seen in high end properties as most of these projects are bought by foreign investors. His group of investors has contributed to the property price increase seen in this segment. Again the fright of speculators has enabled institutional investors to participate in the market but their activity has been limited to the high end segment leaving prices high.
The focus among the developers has also shifted as they probably hold on to the properties awaiting a spike in prices they have shifted to acquiring development sites for the next phase of launches. Over 16 sites changed hands in the last Q a trend seen in this Q. The developers bought 10 sites from individuals and other 6 were bought from government indicating the shift in focus from moving units to acquiring sites for 2011 launches. Of these sites only one commercial site changed hands indicating investors still are willing to hold on sites especially commercial ones until prices are favorable.
Following the good economic rally in the second half of year 2010 the industrial segment several deals in this segment were inked indicating a higher level of activity in the first half of 4Q 2010. While rents did not move up as anticipated the factories and warehouses outperformed other segments by managing moderate increase in rentals and prices. This can be seen from the higher performance of the pharmaceutical and electronic sectors of the economy which expanded significantly with major purchases contributing more than double the activity seen in 2Q 2010.
Investors have shifted to investment sales such as office warehouses and this has had an impact as more and more residential properties are converted to office space. While market watchers expect activity in this segment to remain strong the market dynamics may change. Investment sales were 18.2% up in 3Q as compared to the 2Q measured on the basis of q-o-q. Private investment sale will contribute more to the growth in sales but public sales have also been strong in the last Q making it an option for investors to pursue. The private investment sales had the most activity contributing more than 74.3% of all investment sales recorded in 3Q while public sector investment sales contributed the remaining 25.7% sales.
Moving forward the prices are expected to decline even further but stabilize in the next quarter but the government has been watching and could put more measures to contain prices and make prices stable but this may be an up-hill task considering that inflation has been a cause of concern for the government after the measures were put In place. More so investors will move to areas they perceive to yield a better offer.
The government can also pursue other options to increase the demand of units as it deems fit but the volatility in the market may result to huge variation in prices and rents in 2011. In order to ensure the property market is stable the authorities can result to demand and supply factors as the drivers of prices and rents or pursue a different policy.
While analysts expect the prices to decline further the prices will bottom by the 1Q 2011 but rents will still rally upwards as demand is still high and the government may not put in measures to reduce the prices. The developers and investors will still be keen on good deals on sites and homes that can be purchased now for future use. Again the savings rate has been on the rise and investors still believe good deals exist, making the demand for the properties stable up to when favorable opportunities will return.
Buy, Sell, Rent, Invest, In Singapore
Billy Chen
CEA Registration Number : R029372I
Tel: (+65) 88689999
Fax: (+65) 64021826
billy@billychen71.com
KF Property Network Pte Ltd
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