11/13/2013

Time to flee the property market

The winds of change are always blowing. This time it has come to take the foreign property speculators away. The sharp rise in property prices over the last ten years was contributed mainly by two factors. One, a stubborn and foolish decision not to build, and two, an even more stubborn decision to let more foreigners in to buy up whatever properties that were left. It was thought to be a good thing, at least for those hoarding a lot of properties, other than the developers. Some smell self interests.
 

After 7 measures to cool the market and with the last one raising the cost of foreign speculators, it is starting to bite. Boon Wan had disclosed in Parliament yesterday that foreign interest in local properties had cooled. From 1,400 units sold per quarter, it had fallen to 330 units per quarter. The foreigners are starting to flee the property market.
 

The other factor of not building has also been reversed with a projection of an over supply situation in the next few years after the ramping exercise. The factors contributing to the rise have been reversed. The fall in property prices is only a matter of time and how much will it fall. The other question is how much will the govt allow it to fall and at what level will it be sustainable or ‘affordable’ with a new definition?
 

Should the buyers of properties start to hold back or start to sell before the impending fall? The dumb explanation that it is all market forces is falling flat on its face. It is all about good governance and about bad governance, about managing for inflation and about managing for sustainability.
 

Where would the property market head to? What would be the new explanation of a rising or falling property market?

30 comments:

Anonymous said...

All problems are created by the government. They will only tell people how good they are to solve the problems but will never tell you who started the problem in the first place.

The people had been complaining all these while about shortage of housing and the runaway high property prices. They did not listen. Instead some minister tried to justified by saying, as long as you could earn $1,000 you can afford housing. Stupid way to avert the real issues.

It took the minister 8 try to make the cooling measure work. So tell me is he deserve to be paid millions?

Another thing that I cannot stand is taxi fares. We had been complaining about the complexity of the fare structure for years. Only today they announced that they intend to make the fare more simple. Hello, can you seriously think they worth millions?

Anonymous said...

Dear redbean pau
The PAP gahmen owns or controls 90% of the property in Singapore ... including all our HDB flats.

The Singapore reserves is the Singapore property market.

And you think the property prices here will crash?
Raiding the reserves?

Sincerely
POWPAPBS
(Pissed Off With PAP Bull Shit)

Anonymous said...

There are reports recently forecasting that the property market will see a price correction of 20% from the peak with some even stated a high 30% correction over the next few yrs.

They cited reasons like rises in interest rates, fewer foreign investments and the tightening on FTs.

Economists too are also unsure of the global economy in 2015 and beyond.

Next is the huge number of completed new flats both condos and BTOs coming into the market in the next few yrs and the possible reduction of HDB upgraders as their HDB prices and demands fall.

Never fight with the nature "What goes up must come down!"

CHEERS ...........

Anonymous said...

Actually hor in Sinkieland, where property and prices are concerned, PAP govt has the trump card lah.

Why?

Because the govt own almost all land in the 700 sq km island what, tio bo?

Some more 80% of Sinkies have to live in public (HDB) housing. And who build, set the prices and sell the public housing, you tell me lah? Any choice to have cheaper than HDB prices? And being tiny island with 700 sq km, how much difference is prices even between HDB flats in Woodlands and Marine Parade?

So therefore public housing prices is the base price which private property prices must take their reference, tio bo?

So as long as there are lots of Sinkies who still do not want to migrate, and more foreign talents wanting to come and work and live here, for sure govt can control property prices and they will never crash. Fluctuations yes, but crash, never.

Only a typhoon or a tsunami to hit Sinkieland, or a mass migration of Sinkies or even foreigners out of Sinkieland. will crash Sinkie property prices.

There is a 93% chance these will not happen.



Bottom Fisher said...

RB: " From 1,400 units sold per quarter, it had fallen to 330 units per quarter. The foreigners are starting to flee the property market. "

To use the 3rd Q as an indicator of recent trend and likely price level in the foreseeable future may not exactly paint a very accurate picture.

Traditionally 3Q overlap with the yearly doldrums of the property market.

This year it is especially exacerbated by the fear of tampering hinted in May by the FED or some of those in charge. The subsequent drop in global stock market prices and rise in the US 10 Year Treasury yield further poured cold water in a freezing temperature. Any rise in the future bench mark rate would lead to similar increase in SinkieLand as she is a price taker and follow in lock step the rate set in the US. 3Q local property market sentiment is likely also dampened and partly some knee jerk reaction to the introduction of the new TDSR lending or borrowing framework in June this year. Though foreign buyers are not exactly affected as mostly are cash rich, expectation of future price increase is vastly diminished given that many local speculators and investors forays are likely significantly curtailed by the latest MAS move.

However, 4Q data should come in at least slightly better than 3Q as some of the pre-existing factors are not there, taken effect or having lessened impact on potential buyers' decision. Then again, tampering decision in Dec for 2014 is unlikely given the political dynamics in Washington especially near term forthcoming developments over the next 3 to 4 months.

Thus, any near term correction is likely minimal and marginal. There may be a period of stalemate in the turn of the year between property sellers and buyers in terms of a fairly large spread provided there is no major upheaval regionally or globally.

Given the new TDSR framework in place, buying demand from local players is likely muted in the near term. However, far sighted cash rich foreigners may have a different perspective and idea. Thus, the market may see a prolonged period of marginal dip or moving side way.

Those with deep pockets and substantial cash reserve might take this window period to scoop up some mouth watering acquisitions.

Nonetheless, such market period is likely fraught with uncertainty on either side and no single calculation or one size fits all decision making possible given the myriad different financial positions and needs of both potential sellers and buyers.

Anonymous said...

I have always been saying here that to survive in Singapore for us to adopt a simple living strategy.....

One must try to be debt-free or at least debt-low......

Never never follow the crowds in chasing after things and fall into the many HIGH debt traps around.....

One cannot ensure that the future is full of roses.....

One will be in DEEP troubles if being retrenched, "cold storaged", health problems, etc......

How about other HIGH costs of living, the various needs of love ones and the many other factors affecting you ......

You have a choice !!!

Anonymous said...

Singapore property prices may crash if Indonesia announce they will build a nuclear power plant on Batam or any of their many islands nearby Singapore.

But again there is a 93% chance that this will not happen, same as the WP ready to be govt will not happen even by 2016.

Anonymous said...

Whatever lah, as long as there is a 93% chance that PAP will be the next govt after GE 2016, 93% chance Sinkie property prices will also not crash.

Sinkie property prices will really crash if 60% Sinkies vote in a party which by their own admission, is not ready to be govt.

Matilah_Singapura said...

redebean:

>> Should the buyers of properties start to hold back or start to sell before the impending fall? <<

That would depend many factors, and personal preferences, most important: how much you owe, and whether you can afford to pay it off, even if you lost your job.

The classic way people get caught is that they owe too much, property values drop, which means they now owe MORE as a proportion to value. Is the property being rented or lived in by owner? Then the owner-occupier loses their job. How to pay?

Cannot pay. Therefore sell. But market is down. Everyone is selling. Market goes down further. Desperate: take any price offered. However money from sale not quite enough to pay off home loan -- still owe money...

...and so it goes.

I am a permanent bear. I love crashes, economic distress, hated assets, debt disasters. :-))

Anonymous said...

Few other impotent factors underpinn the strong property price here
No natural disastous other than some occassional ponding n dengue spreads
V v good secure n safe environment.. no gun fight , murder , etc
Stable , acceptable n affordable politics environment..
A pro business pro ft policy.
Going forward property still a good bet of course must be more prudent at the moment..

Chua Chin Leng aka redbean said...

Good for you. Time for you to grab another few properties when the price comes tumbling down.

Patient pays.

patriot said...

Hey

Sinkies seem to believe the Rulers too easily and that is why they got conned all these years.
Property prices will not fall nor will there be less buyers SO LONG FOREIGNERS ARE INVITED TO BUY THEM.
The Only way realty price will come down or even crash is whence a contagious disease happens and cause death by the hundreds per day.
Telling You that property price is falling or less people are buying is merely to give You a FALSE PSYCHOLOGICAL COMFORT; TO MAKE YOU LESS ANGRY AT THEM(RULERS).

DONT BE DAFT
OR
IF ALREADY DAFT
DO NOT BE TOO DAFT.

Today they cool the Market,
tomorrow they can make it super hot,
like hot cakes. They can play the Property Market at will.

patriot

Anonymous said...

@ November 13, 2013 9:29 am
"I have always been saying here that to survive in Singapore for us to adopt a simple living strategy..... "

Why so long winded?
Just vote Opposition!

"You have a choice !!!"

Anonymous said...

RB: " The other factor of not building has also been reversed with a projection of an over supply situation in the next few years after the ramping exercise."

You are referring to new HDB BTO flats?

Where is the over supply when there is still a substantial queue in the system?

Is it based on empirical data or perception?

Most of the new owners are first timers.

Where is the over supply going to come from?

Anonymous said...

RB: " From 1,400 units sold per quarter, it had fallen to 330 units per quarter. The foreigners are starting to flee the property market. "


There is a certain truth in Say's Law that states "Supply creates its own demand".

Q3 saw very minimal new launches in the pte residential market and mostly are in the mass market segments catering predominantly to local buyers.

Oct to Dec are seeing and likely to see many substantial down town and central region pte residential launches.

It would not be surprising to see Q4 figure of foreign buyers coming in at a much higher level than Q3.

Are foreign buyers really fleeing local property market? Not really?

In fact, some property developers are gearing up for upsurge from foreign buyers in certain segments of the market from certain specific countries.

It is almost impossible for local property market to "crash" given the small size of the market relative to potential overseas buyers and likely influx of higher quality immigrants going forward, at least in terms of spending power.

And after the next decade, once Bidari, Tampines North, Tengah Airbase areas plus Paya Labar and Tagar Pagar container terminal ports are used up, there are not that many other huge patches of land to further build new homes.

Many underlying factors imply that the support of housing prices at current level likely would stay relatively strong.

Market experts have been predicting substantial correction in the housing market for the past 2 years but till now it has not materialised. Going forward, barring any major war, conflict or pandemic occurring in the world, the pundits betting on a major correction in the housing market are likely to be proven wrong again in 2014 and 2015.

It took about 4 years since 2009 for the various cooling measures to be erected. If there is any adverse external macro factors impacting local housing market, many of the cooling measures erected could be dismantled in one fell swoop.

With such huge buffers in terms of measures to loosen up in housing market if required, a big crash or correction is highly unlikely.

This is based on the entire market holistically. On an individual level basis, there might be small pockets of over stretched owners or speculators who might need to off load some of their purchases. But such transactions might be a small minority and not likely to impact the market materially.

b said...

It is time to flee the market only when interest rate starts to tick upwards.

Chua Chin Leng aka redbean said...

When we bought into those big American and European banks during the financial crisis those buggers must be telling themselves that it was a godsend opportunity that would never come a second time. It was like cannot lose or at most lost a little in the short term.

And they were like doing an 'all in' in poker. Several tens of billions were just pushed into the table.

Nothing could go wrong? Ask Mr Murphy.

Anonymous said...

Any interest rate increase would wipe out the entire annual American income tax contribution component in paying the interest on their national debt alone. Low interest rate may have to stay indefinitely. It is probably a lesser evil for them than 1923 German Weimar Republic style 24/ 7 bank notes printing to pay off their debts.

It may be good for asset owners but huge distortions would take place and fixed income earners would be screwed badly. But it is still hell in the end but a lesser hell.

Meanwhile, enjoy while the good time is still here.

Things foreign may not necessarily be good.

Western style budget balancing and national debt are just tip of the iceberg.

Anonymous said...

RB "What would be the new explanation of a rising or falling property market? "

There is still at least one more scenario.

Market going side way.

What are the underlying causes?

Anonymous said...

Ang Tau: " Where would the property market head to? "

Converging!

Anonymous said...

Read Tau: " The other question is how much will the govt allow it to fall and at what level will it be sustainable or ‘affordable’ with a new definition? "


Is it a blessing?

祸兮福所倚,福兮祸所伏

Maybe it is a blessing not to be involved.

Where does it end?

What is the point of earning the millions? Does it really make one happy? Are the billionaires the most happy people in this world?

Anonymous said...

If got money just buy lah.
No worry.
Rent them out.
Chiak buay leow wan.
Yr children n grandchildren
oso bian choh kang
forever.

Anonymous said...

Well Fed reserve did tapered off 35 billion from the original 85 billion per month. Resale HDB are sold under valuation. So many developments and new hdb unsold. Wheelock provisioned 100 million as losses for their panorama condo at AMK.
Just walk pass clementi, ghim moh and queenstown on a bright afternoon and u will see many new bto without curtains. The Parc at west coast top in 2007 and 85 units were put out for resale. There are still new units available if you are interest. Fed reserve hinted that they will hike interest rates 6 months after QE ends. This is the correct time when you will see the correct value of the properties here in singapore. Not the current value inflated by hot money and low interest.

Matilah_Singapura said...

@352:

Exactly right. "Hot money" is caused by central banks (primarily the US Fed Rev) monetizing govt debt -- i.e. creating spendable currency by borrowing (lunacy, right?). Increase in money supply menas the price of money (interest rate) goes down, which incentivises people to borrow and "invest" in markets where they think they can get better "value" for their inflated bucks -- hot money has to go somewhere, and in Singapore property market is the favourite, followed by the stockmarket.

Sooner or later govt and people realise that all the indebtedness they have put themselves in has to be dealt with -- i.e. repayments on their debt becomes unbearable, so they stop borrowing and concentrate on paying back the gazillions they all owe, so the stream of cheap money (based on credit) begins to turn off, and prices of assets CRASH.

In China now, it is nearly impossible to get credit unless you have a rock-solid guarantor. The Chinese govt are ADAMANT on strict credit controls -- they are not going to budge. So prices are falling, people going out of business, those with money are fleeing. The Chinese govt will respond strongly if there is social unrest. They won't be fucking around respecting "human rights" if people go nuts and start protesting or rioting.

I look forward to a massive crash, as liquidity dries up, loans are defaulted on, and there is blood in the streets :-))

Anonymous said...

Matilah_Singapura,

Our pap govt is facing a double trap now. SGD too strong and companies moving out. SGD weakens and hot money will move out crashing the properties market. MAS has lost few billions trying to keep SGD strong using their concept. Strong SGD to fight inflation. But they are wrong because domestic inflation are caused by rental and properties prices.

When people stops buying when interest rates increased and buyers became lesser. Sellers will priced their units lower and affects the valuation of those who have purchased at high prices but staying inside. When valuation drops and banks will ask for 200k top up. Looking at how youngster these days. How many of them have 200k of cash in savings?

Matilah_Singapura said...
This comment has been removed by the author.
Matilah_Singapura said...

Yes. The trap is inescapable. If they weaken the sgd -- mati. Keep sgd strong -- also mati.

I like it. At the end of the day the govt will go for wooing the business investors. They will craft policies which favour foreign investment -- and usually it comes with a shitty price the average Singaporean will have no choice but to pay -- sacrificing their economic security and level of "lifestyle" (which will have to drop)

When the shit begins to hit the fan, the banks will tarok the average lenders to top up or face forclosure. By that time, many Singaporeans will be struggling with debt burden, and many will have lost their high paying jobs and taken jobs which pay less. Everybody's balls will be squeezed to unbearable levels.

So that is why I like it. People will be selling off their stuff cheap to raise liquidity to service their high debt levels.

This "distress" to me -- and profiteering opportunist greedy scumbags like me -- presents a wonderful buying opportunity.

Simple concept: buy low, pay cash and bargain lower, and never sell. And then charge rent as high as the market will bear, and spend your life staying drunk and banging girls. :-))

Anonymous said...

A bulk of the current buyers are probably still in sec or primary schools when the 1997 AFC happened. They have yet to see how banks squeezing mortgage holders during crisis.

I still believe that next year will be interesting when FED reserve tapers off their QE and hike interest rates.

Hot money flows into neighbourhood countries like malaysia but they do not offer 1% mortgage rates? We are having the cheapest mortgage rates in the whole world. Even when FED rates at almost zero. Mortgage rates in USA remains at 4.3-4.5%

KAREN LISA said...

There is a informative post about singapore properties and thanks for giving the such a good information about property .

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