Of reality check and market health

A direct consequence of the meltdown of the US sub-prime market is the abrupt halt of speculative activities in the Singapore property market.

Speculators, sub-sellers or flippers, whatever they are called, have pulled the MIA trick and the red-hot flame of the property market was doused in the second half of August.

In fact, the market quietness has followed an earlier fear that the Government might reintroduce some demand-side measures against property speculations earlier. Coupled with the subsequent share market turmoil, the property bull was booby-trapped and dealt a double-jeopardy.

Investors are exiting the stock market for fear of more bad news from the US. There are still plenty of unanswered questions on the extent of the damage. However, physical property market is strongly rooted on sound fundamentals such as the upcoming casinos, new jobs, rising rents and uplifting GDP figures.

Some foreign funds may have toned down their exposure here for a while fearing liquidity crunch; and some offshore funds may have faced difficulty getting financing, others are still funding property investments, though more cautiously than before.

However, genuine home buyers are not affected by the market uncertainties. Moreover, the temporary lull can be partly attributed to the traditional Hungry Ghost month and not just the stock market. Many developers are not launching new projects in a big way because of superstition.

Risk awareness that has risen generally with all that has happened around the world is a good thing to have. Many are now aware that, if the problem persists, it could lead to higher interest rates and thus higher borrowing costs which would in turn hit every investor’s pocket and affect asset value.

To put it in proper perspective, the property market is not being unravelled; it is just getting a reality check. The underlying economic fundamentals are still very sound – to say the least. Remember the investment maxim – buy on weakness and sell on strength.

Written by Sam Gian – independent real estate sale consultant

 

Property Market Summary

Property Market Summary

1. Property market seem to continue its rise this month which prompted Minister Mentor and Senior Minister to fire the “warning shot”. However SM Goh pointed out that property price surge occurred only in the higher end sector.and prices for the middle-income and for the HDB heartlanders are still affordable, though many quarters have expressed fears of a property bubble,.

2. A HSBC’s senior Asian economist believe that there is more room for the real estate market to move upwards, because, in real term, prices of private residential properties are about 25% below the previous peak. This is because the ratio of home prices to income is only half that of 1996 due to high wage growth and low interest rates. In other words, houses in 1996 were considered much more expensive than now as the interest rates then were higher and income level were not as high as now.

3. I personally agree with that because the private homes is still in short supply, even though there will be close to 60,000 private homes coming on stream in the next couple of years, Singapore could still face a serious shortage of supply in private housing in the short term.

Demand has far outstripped supply by more than two-to-one and the 4,400 units that were added to the housing stock in the first quarter of this year had done little to quench the thirst of the insatiable market.

The nature of real estate supply is such that much of it will only materialise in mid-2009 or early 2010. Even when that comes to fruition, we are talking about only 16,800 private residential properties due in 2009.

4. To ease the crunch, the Singapore government has already come up with supply-side initiatives, such as the Government Land Sale Programme which has since been in full swing. It may add another 3,500 private homes in the next couple of years. Plus the sites of projects sold en bloc which could yield a further 19,500 more private homes, the problem may be alleviated.

5. Similar to other market, after a sharp rise, it is bound to have a correction. Not too worry, it is not a crisis but an opportunity to jump in the property market.

Free Property Valuation Service

I have some good news for you this month.

If you need to know the property value, whether as a buyer or seller, an independent property valuation can definitely help you to price the property correctly.

Now a new site www.propertyvalue.com.sg has just been set up to brings easy tracking of property values for home owners and property investors alike and it is free at this moment. Try them out.

Eddie Chiew

www.propertyhomeowners.net

 

Bullish Sentiment For Singapore Real Estate

The general consensus of the property market appear to be bullish. Judging from the number of sellers withdrawing from sale and the high expectation of the seller, Singapore property market is set to see the upward trend in the coming months. According to CitiGroup -

1. Price rise likely to be 20-25% in 2007 — URA price index showed a +4.8% qoq rise compared to +3.8% in 4Q06, the steepest increase since 4Q99. Similarly, the rental index showed the steepest rise of 7.8% qoq on the back of the tightening supply. As occupancy continues to rise, rental and price rise are likely to accelerate.

2. Occupancy and rental to reach new highs — Net negative supply in 1Q07 as 885 units were demolished compared to the 716 units completed. Demand remained strong at 2,225, pushing occupancy rate to a record of 94.9%. With just 4,573 scheduled for completion for the rest of 2007 and possibly another 2600 units demolished, we think that both rental and occupancy rates will likely reach new highs of 96.6% by end 2007 and 97.2% by end 2008.

3. Transaction volume at record high — 4,565 uncompleted units were sold in 1Q07, surpassing the last record of 4,162 in 4Q06. 4,282 units were transacted in the secondary market, which is the highest since 2Q96.

4. Mass market likely to catch up — Attractive rental yields of around 5.3%, is likely to continue to draw investors into this segment of the market. Positive sentiment and strong affordability amongst the first time buyers, is also likely to drive prices sharply higher in this segment.

5. Negative supply of office in 1Q07 — Net supply fell by 43,000sqft in 1Q07 while demand remained strong at 660,000sqft. Signing rental at prime grade A office space in Raffles Place has reached S$13-14psf compared to S$10-11psf in 4Q06. With more demolition scheduled than completion resulting in a net fall in supply of 600,000sqft in 2007E, occupancy and rental rates should continue to rise.

6. Office rents and capital values continue to surge — According to JLL, prime grade A office rental rose some 20% to S$11.80psf. We maintain our forecast of S$14.50psf by end-2007 and S$18.50psf by 2008. We also highlight that a new benchmark transaction price of S$2013psf was set by a relatively small building along Robinson Road.

Eddie
http://www.propertyhomeowners.net

 

Home Buyer – have you done your home work ?

From my years of experience, I found that home buyers did not do enough home work and tend to overlook some of the things that are important before their search for the dream home.

So what are the things you have to do and here is my suggestion.

• List out the requirement of the home that you are looking for. Know the neighbourhood and the facilities the town provides.
• Get your financing pre-approve – When you are shopping for a home, do your sum and this will give you more confidence in making your offer.
• Have some market data ready – you need to have some idea of the market price around the area you are look for.

Check my site if you want to have more buyer resource.

Eddie

PropertyHomeOwners.Net