Singapore Real Estate – Downtrend Unlikely to Continue

As buyers are waiting for the market to dip further with news such as Japanese billionaire Katsumi Tada losing $15.8 million (SGD) on his St Regis penthouse, here are some news that is happening around the world and in Singapore that could make you think a little bit more why waiting might not be the best thing to do.

World Stimulus Plans in order

China stimulus plans

These are some abstracts of what happened just a month odd ago in China, the biggest concerned market in the world.

CHINA DATA: Earlier, sentiment was supported by Chinese data showing consumer inflation remained at 1.4 percent in March, well below the government’s official target. That fueled expectations the central bank might launch new stimulus to fend off deflation. Low inflation is a boon to consumers but a bout of potentially damaging deflation could add to fears about the Chinese growth outlook.

CHINA STIMULUS: “We expect possibly the weakest” growth in China this quarter since the 2008 crisis, “and thus more easing,” Citigroup economist Minggao Shen said in a report.

Japan stimulus plans

NIKKEI RECORD: Japan’s Nikkei 225 closed down 0.2 percent to 19,907.63 after rising above 20,000 for the first since April 2000 during the morning session. The gains were based on expectations for Japan’s economic recovery and brisk corporate earnings, following aggressive monetary stimulus. The benchmark index, however, could not sustain that level as investors turned to take profits.

With any stimulus, there will be more money flowing which supports strong inflation for months to come, especially with markets like China and Japan. Real estate no doubt has always shown and is one of the most preferred asset class to combat against inflation. 

STI jumps over 3,500 for the first time in 7 years

LOCAL shares surged past 3,500 points for the first time in more than seven years yesterday on hopes of more institutional funds flowing here after the central bank refrained from easing monetary policy.

The Monetary Authority of Singapore (MAS) decision is tipped to send the Singapore dollar up in coming weeks. Those expectations in turn helped the benchmark Straits Times Index rally 36.69 points to 3,521.08, with 3.46 billion shares worth $1.44 billion changing hands…  to read more, check out ST

The cycle of investors usually changes out from stock market to property market once they cash out from properties to lock in asset investments than holding on stocks.

MAS to maintain policy of modest, gradual appreciation of Singapore Dollar

MAS has mentioned to maintain the slow strengthening against the Greenback, which stables up the massive hike on mortgage loans that’s based on SIBOR and SOR which most of the loan mortgages are based on for the past 2 years. And with the US Fed just releasing news on interest rate hikes to be slowed down as with LA Times mentioned below,

US Fed to keep interest rate hike on hold

The economy suffered through another case of the wintertime blues this year as growth slowed nearly to a halt, probably delaying a Federal Reserve interest rate hike until September or later.

Total economic output, also known as gross domestic product, expanded at a disappointing 0.2% annual rate in the first quarter, the Commerce Department said Wednesday.

That was down sharply from 2.2% growth in the fourth quarter and well below what analysts expected as bad winter weather, the West Coast port dispute, falling oil prices and the rising dollar took a heavier toll on the economy than originally thought… more on Los Angeles Times

There was also a surge and rush on people doing refinancing for fixed interest rate package, averaging currently to about 2.1% on the high for most of the first year. Home owners are prudent not to be caught in a situation with not being able to afford monthly mortgages.

MND wants soft landing for housing market

MND Minister Khaw Boon Wan mentioned in March 15 in Parliament that the Government would like to see a cushion landing for the market. As of the falling prices in HDB and private market which has already been happening since the end of 2013 till now, we have seen quite a fair number of distressed, mortgage sales happening especially towards the end of 2014.

Running a very active group of full-time realtors, the activities have shown pockets of drop in prices in different projects especially on strata titled units (condominiums, private apartments), and whereby landed houses seem to be least affected by corrections.

Who are the ones that would be affected when any cooling measures are relaxed?

First time buyers will be the ones that will lose out on the measures that was set in place to please them from the start since Additional Buyer Stamp Duties is not affecting this segment of buyers. With the Total Debt Servicing Ratio in strict placement on the lending, they still do allow this group of people to loan up to 80% for their first property.

For second and third property owners especially, I don’t think the extra ABSD is holding them back since we could see some interesting deals where owners are willing to shave between 15% – 18% on price discounts especially to the higher quantum properties. The main measure that is holding back would be the ability to borrow, since MAS enforced only 50% of LTV is available for the second property onwards.

Otherwise, we can still see interesting deals that formed up on the commercial side for conservative real estate investors who do not want to pay the extra taxes to the Government. The sellers are thawing in pricing for the past few quarters and it probably wouldn’t happen for too long as most of the residential supplies has already came online. It is but a golden opportunity especially for first time residential buyers.

These are views which are formed personally through observation of the market movements, sentiments and discussion sessions with legal conveyancing lawyer friends on their activities. It does not form part of any offer or recommendation, or have any regard to the investment objectives, financial situation or needs of any specific person. (I just have to do this)

Written by Benson Koh
Benson Koh is a professional real estate realtor with over 11 years of experience specializing in all forms of real estate consultancy and brokeraging of different segments from regal homes to commercial spaces. Also a boutique developer, he manages bothSRI5000 Developments which concentrates on landed homes as part of his land bank segment and Singapore Realtors Inc (SRI), a real estate agency which has over 7 years of group experience. You can reach him here via various channels. [ Facebook | Linkedin | Twitter | RSS Feed ]