Crisis in Singapore property market is brewing

The cruel facts about Singapore property market

In the first half of 2018, there were 35 collective sales with amount exceeding $10 billion, while for the whole of 2017, there were 27 deals totaling $8.13 billion. From 2000 to 2017, about 80 percent of new homes came from plots sold through the Government’s land sales. But for 2018 and 2019, about 75 percent of new homes are expected to be built on lands that were acquired by developers through en bloc sales.

The new additional units are about 36,030 and those unsold inventory is about 23,500. The current unsold inventory and new supply totalling more than 59,500 units are sufficient to meet demand for about six to seven years but the new units will take only about 4 years to build.

In addition, prices of private property have risen 9.1 percent in the last four quarters. Before that, prices had declined for 15 straight quarters, falling 11.6 percent by the middle of 2017.

The latest cooling measures introduced by the government on 5 July 2018 was described by some analysts as draconian and high-handed. But to me, it came a bit late as this time, not only some uninitiated buyers during this U-turn of private property index (PPI) were trapped, but most of the en bloc sales developers were also made to bear the brunt. The problem is that it may not have dawned on them yet that they have been trapped.

My Prediction

There is still a real demand for retail residential property for the next half a year. However, the problem is that prices of resale property market have remained stagnate even when the PPI has gone up by 9.1 percent since mid-2017. This has been artificially caused by irrational prices of new launches. Sellers have to be realistic in their offer price as the window to sell is about half a year before the situation becomes worse.

I estimate that 75% of developers of en bloc sales done within 2017 and 2018 will scramble to sell their mostly yet-to-be-launched units within 4 to 5 years from now so as to run faster than their competitors. I can foresee that developers will give more and more discount as time goes by before their developments obtain the temporary occupation permits. Coupled with the impending stock market crisis and interest rates hike, the PPI should plunge by about 30% by 2Q2022.

If you have patience to wait till four years later in 2022, you should be able to buy your private condominium unit at a price 40 percent lower than that of today if you work hard enough to look for it. I believe by which time the government will have removed all ABSD and SSD.

HDB prices will not drop that much because of government's very effective control mechanism. When the crisis is within our government's control, they should be able to slow down the speed of the drop, precisely like what they achieved from mid-2013 to mid-2017. But if the decline is due to an international crisis caused by the US or the China market crash or some downturn equivalent to the scale of the previous 1997 Thailand's meltdown, our government cannot do much.

I was able to buy my investment property at the trough in 2004 and sold it at the peak around end of 2012. I am confident that I can repeat the feat to buy a bigger unit at the next trough in 2022.

Superphang
https://superphang.blogspot.sg