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Singapore Real Estate Market Review September 2010
The overall Asia economic performance has been impressive in the last few months with most economies reporting stellar performance in the 3Q of 2010 unlike economies in the Euro Zone and America which continue to experience slackened recovery. The Singapore economy performed even better with the GDP up 18% in 2Q and all the sectors showing resilience, in particular visitors’ arrivals to Singapore climbed 24.1% in the month of August. The Singapore government stimulus especially in the real estate has seen the demand for both commercial and residential property grow significantly in the 3Q. Market watchers expect this rally to continue to the final Q of 2010.
The government intervention so far has been successful and recently announced new measures to build on the success achieved so far. The recent measures are aimed at maintaining a stable and sustainable property market and many analysts believe that the government measures so far have contributed to the positive sentiment in the market. The prices for private residential in line with demand has increased by a moderate 11% in 1Q and 2Q this is an all time high when analyzed on y-o-y basis.
The government increased from one year to three years the holding period for imposition of Seller’s Stamp Duty (SSD).Furthermore for buyers with outstanding loans, the government increased the minimum cash payment from the current 5% to 10% of the valuation limit and at the same time decreased the Loan-to- value (LTV) limit from 80% to 70% but only for loans granted by MAS regulated financial institutions. This is seen as an attempt to solidify the gains made from previous measures and stamp speculative selling that could drive the current market prices to unsustainable levels.
While the government actions so far are laudable it may affect the supply side especially for private condos where individuals hold back and withdraw properties from the market with expectations that the government will reverse these measures in the near future and thus open the market to willing buyer willing seller at the agreed price. The buyers have been pushed to the periphery as the measures the government has put in place from loans to taxes become effective and to certain extent produce the desired results. The supply of units will be at all time high through the 3Q and with the prices becoming more stable, then second time buyers are expected to keep the property market buoyant. However demand is expected to be high whether it’s the primary or secondary market, the most significant reason being that both buyers and sellers are still holding their positions.
The private luxury condos have experienced a rally seen in most of the year even with the government measures to cool the market. Analysts predict that these measures will have little effect in this sector especially with the current low interest environment and good economic performance the buyers will have no problem financing acquisitions in the 2Q. Permanent Residents will continue to be the driving force in luxury condos sector demand and resultant spike in prices, with more citizens from China and Malaysia coming to Singapore market in search of properties mostly at the top of the pyramid; the current prices will not be going down any time soon.
The property market will continue its brilliant performance going forward as the global property market recover even though market watchers believe that the global market property recovery will be uneven due to the various measures put by governments. However most of the Asia property market will continue to register improved performance. Hong Kong, Singapore and Australia property markets are expected to lead the pack of the best performing real estate markets in the world in 4Q 2010.
According to figures released by the Urban Redevelopment Authority (URA) sales of homes are at an all time high especially at the top and middle level of property market. This is expected to continue since buying sentiments are still strong and demand for homes is still high even with the current many project launches. However home buyers will be looking for good return and rush to buy units that are relatively well priced because many are cautious despite the good performance of the economy in Singapore, much of the other economies like UK and USA performance has been sluggish and no reprieve is coming soon, and therefore sales volume in Singapore will pick up as we head to the end of the year, even though the market will remain volatile until markets in the west fully recover.
The government measures will continue to give the property market direction as the economies in the world recover then it will be possible to get a clearer market performance and sales and prices will be more stable in the months to come, the properties prices will be more realistic and reflect market forces and sellers adjust prices to reflect these forces.
Going forward and as developer’s launch more projects buyers are poised to be choosier and will be willing to pay more for top end properties that have access to social amenities such as railway, schools, malls and panoramic view. Foreign residents will particularly play a big role in the luxury property sector and as the government invites most of them to become citizens they will value to invest in property to rent or purely to make capital gain, especially with the return of confidence after the resent economic growth figures were released and a realization that the economy will not cool any time soon and the government forecast that the economy will grow by 13- 15% may actually be surpassed as we near the end of year 2010.
The median priced properties will also retain the value holding power as most buyers search for good deals which are likely to be in this segment, indeed most buyers are now going for this segment since it does not exhibit volatility during the current economic crisis.
In order to solidify these gains in property the government will need to come up with a mechanism to reduce the cost of construction this would be of immense help to developers and would reduce the prices to a sustainable level. Singapore is only a few points lower from being Asia most expensive country just below Japan. Seeking alternative construction materials would ease the current construction cost especially for public housing and make properties affordable to majority of buyers. With cheap construction technology and materials readily available from China this cannot be farfetched and can be used to sustain the current demand. Building high rise and more land being used to do public housing could also bring the current prices home and would make the property market a choice for many to make worthwhile lifetime investment.
The year 2010 has seen the government change policy often and whether this is sustainable remains to be seen, the government has acted to tighten both supply and demand and this has seen the launch of more than 16000 units envisaged to be completed this year, this to a large extent has been in the pipeline and the market sentiments are favourable to sustain this, and has been aided by foreign buyers who are keen on the stellar performing Singapore property market. The current supply of about 14000 units a year is still below the y-o-y average but the developers have lined up more launches in the 4Q 2010. However the government will give the market direction as the policies announced become effective and tighten control on the property market.
The Government land release to the market will continue to influence the supply side, with more than four land sites available, the government aims to sustain this demand, and with an economic growth just above 18% measured on q-o-q basis in the 2Q 2010, the government will have to make more commitment in order to hold on demand and prevent a surge to a point where prices go higher than the current position which would invite speculative buyers and sellers back to the market.
Going forward the markets will remain active in the 4Q 2010 and buyers will make commitments to new home purchases before the end of 2010.The prime areas will attract the most interest both from citizens and foreign buyers who anticipate the prices and rentals to remain higher than in most of the other areas across Singapore and in western countries.
The possibility of rise in prices will persist as more buyers search for homes and as confidence in the market improve in the retail market coupled with the macroeconomic stability currently pursued by the government. Going by the performance of the in the last 3Q the property market is on the of recording the highest performance measured on y-o-y both on the number of units launched and the purchased units a clear indication of the resilience of the market and good measures the government has put in place.
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
CEA Licence Number : L3008430D
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