Singapore Property Market Outlook 2014 | Is This An Awakening Year?

There are still quite a lot of retail investors who feel that they are missing the boats and plunged into the Market to grab a unit or so. That’s why we can still see frenzy buying of recent property launches such as the Singapore 1st retirement condo, Hillford (with 60 years leasehold) which was 100% sold out within the first 6 hours of preview. To certain extend, the exceptionally low interest rate environment which was caused by Sub prime crisis could be well one of the fueling factors to spur up the Property Market growth because property investors can just gear up to leverage more. But if we go deeper, is it got to do more with the marketing gimmicks by the developer?

Imagine this is a 60 leasehold property. Holycow…….while many retail investors thought that the units were in the affordable range, they failed to understand that “affordability” does not imply it is cheap. On the contrary, this is way too expensive if we converts such “affordable” price to a 99 years leasehold equivalent. Don’t forget, we are talking about a 60 leasehold development with pathetic squeezy unit sizes from 394 sqft. If i am one of the intended retirees, i will rather not choose to stay there.

Singapore Government anticipated such continual trend may lead to property bubble problems and introduced a series of cooling measures to slow the growth since August 2010. The key question which we have in mind is how long can such Singapore property trend lasts?

History will not tell lies but facts. With reference to the below private residential property price index for a period of two decades, anyone can easily tell you it is the market turning point from historical high to a dipping down. It could be jolly well the start of the gradual bear property market. The dip of the private residential property index fell 1.8 points from 216.3 points in 3rd Quarter 2013 to 214.5 points in 4th Quarter 2013. This represents a decline of 0.8%, compared to the 0.4% increase in the previous quarter.

On the other hand, if we take a closer look at the HDB resale price index, it has a similar trending down with a dip in HDB Resale Price Index by 1.5% from Q3 2013 (i.e. 204.8) to Q42013 (i.e. 201.7).  Are these two key property price index in Singapore suppose to behave and react the same to the current property market? Or was it due to a series of Singapore government cooling measures such as TDSR and ABSD?

Now, we look at stock market. Traditionally, stocks run faster than property market by probably six months or so..due to its liquidity nature as compared to properties. What happen to STI now? If we take a closer look at 5 year STI chart, it is downtrending since historical high on week 13 May 2013 at over 3,449.3. If the support breaks at 2646, i think this may be the start of the real bear market for both stocks as well as property market.

How about the interest rate which fueled the Singapore Property Market for the last 3-4 years? Presently, the 3month sibor rate is at 0.40205. This will probably be revised up sooner than we have expected due to the new Federal chairman, Ms Janet Yellen indicated that the rate may rise anytime from six month later. If so, what will happen to our sibor rate? It will certainly revise up accordingly. If you are considering refinancing package right now, it may be best if you can choose 1 year variable rate and later refinance it again for the next 3 years fixed rate  or just simply opt for the 3 year fixed interest rate package if deemed fit.

Future Property Market Trend

As mentioned in one of my earlier posts, one important factors to consider market entry or exit is really the demand vs the supply. In 2016, we will be having over 73,000 units flooding into the market. It is an awesome number to look at. If we look beyond 2016, can the excessive supply of both private and public housing units be well consumed by the market? If not, we will be able to see a tension in pricing strategies by the affected developers and the sellers. If i am you, i will sit back and relax to look at the local market especially in the midst of experiencing the impacts of various government cooling measures. There is’nt any pressure to jump into the market yet. As for overseas property investment opportunities, it may not do any harm to look at them and assess further for better returns of investments. Build your bullets before the next wave comes.