Property market outlook for Singapore
The following article is a guest posting by iMoney (Intelligent Money), which was founded in Malaysia in April 2012 and started out with a team of three. It took 14 days to get from an idea to a fully functional website. The company’s vision was (and still is) to simplify financial matters for consumers, thus helping them make better decision.
Property prices in Singapore are among the highest globally. This market has always been a demand driven one. That is because Singapore is a commercial hub, connecting the whole of Asia with rest of the world. The country attracts business people, professionals and executives from across the world. As a result, demand for both office space and housing have persisted over time.
Apartment prices are on the raise
Apartment prices of Singapore’s core central region including Orchard Road district increased by 49% and prices in the suburbs that are popular with middle-class people increased by 70% since the end of the global financial crisis in 2009. According to a Channel NewsAsia research, household debt was 77.2% of the gross domestic product at the end of March 2013. It was just 64.4% in 2007. But the property prices grew by 120% in the same period. It clearly indicates that properties are overvalued at the moment. But Shares of blue-chip property firms dropped in first half of 2013 after the government had introduced new cooling measures for the market including a curb on home loans and imposition of high stamp duties for home buyers. This suggests that the property market will go through a correction soon. It is actually good for the potential long term investors. Buying a property in 2014 will give more return as the market is likely to have a corrected price.
Supply will overcast the demand
According to the Urban Redevelopment Authority, 25,000 to 27,000 public housing flats will be ready for sell in 2014 and about 95,000 new private units will come on the market in the next five years. The large number of new flats will press the vacancy rate upwards. Historically, when vacancy rates hit 8%, property prices start declining. With the huge supply of public housing flats and private units in 2014, supply will overcast the demand. The government’s decision on imposing more restriction on supply of foreign workers will also affect the property market. As consequences, property prices are likely to drop throughout 2014. But demands for retail and office buildings will persist. Therefore, prices and rent of retail places and office spaces may increase by a small margin.
Barclays says prices will go down by 20% by 2015
A recent analysis by Barclays revealed that residential property prices of the country is likely to go down by 20% by 2015 as the sector is growing through a correction phase. The report forecast that prices will fall about 5% in 2014 and another 5-15% in 2015. This is because there is a general expectation that short-term interest rates will start ascent in the last quarter of 2015 and increase by about 200 basis points. Property price is strongly tied to the pace of interest rate rises.
In short, the property market of Singapore will not be a good choice for short-term buying and selling in 2014. But it will be a good option for long term investment.