Singapore Property Market Sentiment Significantly Influenced By New Measures

In a survey I carried out to Propwise.sg subscribers, 66% of the 269 respondents accept that the existing 4th round of property control measures by the government are sufficiently harsh to stop the formation (or worsening) of a property bubble in Singapore.

71% of the respondents believe that property prices will stay flat or go down in 2011 as a consequence of the measures, a pointed contrast to the bulk of researchers who had predicted continued property price appreciation of this year before the measures were recounted. Many think that the measures would severely limit the buying pool to just new house purchasers, making it difficult for backers, stockholders and even some upgraders from purchasing.

Of the 29% of respondents who thought that prices would still continue to appreciate in 2011, the low rate environment, powerful economy and low unemployment levels were cited as reasons for the ongoing strength of the market regardless of the measures.

31% of respondents were avoiding any farther property investments for the present because of the measures, suggesting that the short term pool of buyers and thus strength of demand would be weaker going forward. On the selling side, only 7% of respondents were interested in selling their property shortly before the market got worse, possibly a result of the robust balance sheet of the sellers. With consumers holding back and sellers not frantic to sell, transaction volumes are probably going to plunge, making the life of a property agent tricky indeed.

The measures were also criticised by some respondents for stopping real buyers and upgraders from making their purchases. The high amount of cash required to buy the second property would present a significant stumbling block for the average Singaporean.

Speculators would also be forced to think about keeping their property for the long run as they cannot expect to flip it for a decent profit on TOP as they did during the past “their focus must shift from capital increase to rental yield. Also, with the higher downpayment requirement for a second and bigger mortgage, the return on capital will have fallen, making property a less tasty investment for some.

There was also some feedback about how the measures have not differentiated between neighbors and foreigners. In reality some believe the measures basically lean the field in favor of cash-rich foreigners who could then take advantage of any weakness in the market to pick up more properties at good prices.

Interestingly, long term investors have not been discouraged by the measures “55% of the respondents were avid on making a property investment if prices softened. The primary issue was on how severe the decline in costs would be. Unless there had been an external crisis of some form, the situation was unlikely to be as bad as in the Asian Crisis post-1998 thanks to the ample liquidity in the system. Some respondents thought a fall in costs of 10% to 15% would be sufficient to lure them into the market.

Some fascinating comments from respondents

“As long as Singapore economy is still doing well and the low rate of interest environment is still there, property will continue to do well too. Unemployment is awfully low and incremental wages are all fee good factors. Do not forget, market may continue to do well this year as East Asia is still booming.”

“Buyers of shoe-box units (cubicles) of 350 to 500 sq ft (Mickey Mouse units) are another significant culprit contributing to rising property prices. Though the quantum payment is little and thus reasonable, in terms of $psf, it is a quantum jump. This gives the developers the confidence to keep raising their costs to way beyond $1,000 psf even in far-flung places as Choa Chu Kang and Yishun on 99-year leasehold land. The government should so forbid the building of houses below a certain in-built area. Having declared all this, I am more than sure that current prices are highly inflated and not sustainable.”

“I think it is not most of preventing a property bubble as we are in a bubble. It should be more of the simplest way to downsize/let down the bubble continuously without bursting it.”

“Now that I can no longer earn cash investing on properties in Singapore, I'm going to be looking more actively on overseas properties (ie. UK).”

“Speculators ‘ sensibilities will be dampened but perhaps new buyers and cash-rich. Upgraders will benefit from this move. “

“Unlike 96 and 07, the market today is flooded with cash. There is enough liquidity now to see prices going up for a bit, at least for this year. After that, anyway, it’s 2012. We need not fret about property costs when the world is coming to a close, do we?”

Hope you enjoyed reading this Singapore property market article!

Propwise.sg, a top Singapore property blog, is devoted to helping you understand the real estate market and make better calls. Visit us to read more Singapore property marketarticles.