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Home | Real Estate Blog | Articles | Video | Forum | Success Goal | 中文
Singapore Real Estate Market Review ( 2 ) October 2010
The world economy now clearly shows signs of recovery though at a slow pace. Statistics from larger Asia show promise as the market that has remained resilient and that will lead in the recovery. The Singapore economic statistic estimate indicate a slit decline in the growth seen in the 2Q 2010, the real GDP declined by 19.8% in the 3Q 2010 measured on seasonal q-o-q basis. Analysts expect the economy to achieve the target of between 13-15% economic growth rate in 2010.
As the economic performance by major Asian economies improves the real estate market will continue to show promise as the best investment alternative available to home buyers and investors alike. Most companies that had halted expansion programs are expected to resume expansion and as they register more head counts there will be more demand of both commercial and residential properties. As confidence in the market returns the major brands will require more space to increase production and this is expected to be an opportunity for commercial property owners to move the outstanding stock.
The government measures to cool the market seem to be working in the mid-range and lower segment of the market but the luxury residential sector prices went north during the 3Q mainly driven by purchases by the permanent residents and foreign buyers with keen interest in the landed properties. Market watchers expect though the rate of increase to decline as the market respond to these measures as more buyers are expected to be interested in the relatively well priced mid- range apartments and the fact that over 80% of the population are housed by the HDB.
While the Asia property market has provided relieve to the lest of the world as the only performing market Singapore market has provided the much needed point of reference even to the neighboring countries. After the recession seen in 2009 the property market has achieved a stellar performance all through the last 3Q of 2010 with pent up demand for all the sectors the authorities were left with no option but to intervene to bring the sky rocketing prices back home. Following the huge supply of properties in the market in the last 3Q of 2010 then the only reprieve would be an improvement in demand otherwise rentals and prices for most of the properties are expected to head south as more launches and completions of units are done.
With rapid increase in population and more foreigners coming to buy homes the demand for mid-range and luxury properties will rise in the months to come. This can be seen from the number of visitor’s arrivals to Singapore, with an increase of 18% in August to reach a record high of 996,000. It is possible to convert some of these visitors to buyers and with the government policy of offering incentives to permanent residents most would take up some properties in Singapore.
The import and export indices has declined by 0.2% and 0.4% respectively in August and this trend is expected to continue in the next two months mainly attributed to decline in the world prices of two main Singapore export, electronics and pharmaceuticals. However, manufactured products and domestic supply price indices have been resilient and were unchanged in August according to data released by the government. More manufacturers are expected to increase production and take more space as the export and import trade improve.
This is well reflected in the growth of prime commercial properties where rents went up by 3% measured on q-o-q from S$ 6.7 per square feet / month to a high of S$6.9 per square feet/ month compared the 2Q 2010. This has not dampened the quest for manufacturers to get quality offices and vacancy revels have gone south with more uptake of spaces as major companies expand. The major concern however will be the huge supply in the pipeline that could influence the direction the market will take in the last quarter of 2010.
The major hindrance to the expansion in the supply of units especially in the Core Central Region will be the fact that land for development in this area is limited and the available ones prices are prohibitively high and this may pose a challenge in the next few years to come as demand exceed supply in these areas. With the current demand of 1.3 million square feet of office space every year then the authorities will have to do more to satisfy the resulting demand from the economic recovery, this may however be affected my the less than promising economic recovery growth in the western countries that were adversely affected my the sub- prime mortgage crisis.
The rental market is expected to maintain the bullish trend recorded in the past three quarters mainly supported by positive market sentiments from the bulk of potential buyers and the cooling of the property prices in response to the government measures. The 18% economic growth recorded in August may have brought back to the market buyers who had held back their purchases as most sites have recorded more up-take throughout the year.
In the months to come rentals will fluctuate as the economic outlook still remain mixed but strong demand could underpin the increase in rent seen in the past 2Q and 3Q of 2010.The rate of increase in rent could vary from each region but will continue to be significant in the CCR and in the luxury residential areas.
The robust economic performance witnessed in the last few months has seen the industrial property market expand as more firms’ set-up business in Singapore. The rents for factory and godown spaces went north for most of the 3Q. Ground and upper floor prices were up by 10.7% and 8.7% q-o-q respectively, the ground and mezzanine floors of godowns commanded an impressive 11.1% and 9.5% q-o-q respectively. Increase in prices is expected to continue as more firms take space as the economic fundamentals remain strong and is predicted to achieve the earlier predicted figures at the end of the year. The domestic supply will drive the economic growth as more people have disposable income and this may end up in the property market .The government rules have ensured that both buyers and manufacturers have positive sentiments as we head to the final Q 2010.
With the good economic performance however buyers still expect good bargains and are looking at the recent launches for better prices and a more selective mood has been adopted in all the property sectors. The top tier though has not experienced price reduction has been the focus of many investors who want the best quality and good location; in essence this segment will command the best prices and rental to the foreseeable future. In contrast the mid-range property sector will be more stable and may experience a decline in prices and rentals during the 4Q 2010.
As the market continue with the current exuberance over the economy more demand for units could emerge from first time buyers who still want an investment mostly in the relatively well priced mid-range segment. Having seen the worst in year 2009 recession the boom is certainly not yet over until 2011 and may be supported by better performance by markets in the west. This may however be curtailed by the performance of the Singapore dollar against American dollar which could reduce investment from abroad.
The government increase in development charge to 13% has not affected the property market to a greater degree but it’s the subsequent rules that have cause jittery in the market with the government announcement requiring individuals with properties abroad to first sell those units in order to qualify to purchase the HDB units. This could have passed unnoticed but since the HDB houses more than 80% of home owners then one begins to see the impact. The major casualties of this rule will be the permanent residents who own homes outside Singapore, they will have to contend with the fact that they can only buy the mid or upper tier properties and may not be able to buy the relatively well priced HDB units. This recent rule is seen as the government effort to enable more permanent residents take citizenship in order to increase the population.
Private investment units may reduce as the market respond to these rules, the actual effect will however be difficult to fore tell. One of the obstacles the authorities may face is ascertaining the overseas held property not unless an individual want to purchase the HDB units; this may not be an option for many to invest in these units, furthermore some investors bought these units as investments and the overseas units may not be for sale any time soon. However the previous rules introduced by the authorities have restored much needed confidence in the market and has made property prices reasonable to majority of home buyers. The property market in Singapore may prove to be the most regulated in the world going by the recent rules which may be good or counter productive.
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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