Record private home sales: a boom or bomb in the making?
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Record private home sales: a boom or bomb in the making?
July 17, 2009 by admin
By Jeremy Koh and Eugene Yeo
A relative of mine bought a 3 room unit of a 99 year old condominium in Tampines last month at a whooping $900,000K.
If I remembered correctly, the median price of the project was only $700,000 in 2007.
A colleague bought a penthouse at The Calrose for over $1.5 million dollars. The launch price 3 years ago was slightly less than $1 million dollars.
Are we entering another bull run in the property market?
The Straits Times seems to think so, at least from its suggestive headline “Record private home sales’: -
“It was another electrifying month for the private home market, with sales last month surpassing even levels seen at the height of the boom two years ago.
The recession-defying numbers for yet another month point to surging confidence among buyers and sellers, and signal that the worst is likely over.”
[Source: Straits Times, 16 July 2009]
Are the good old days coming back soon? Will prices go up indefinitely?
One does not need to be a property expect to realize that current prices are unsustainable in the long run for the following reasons:
1. Though the government has moderated its GDP forecast in view of better than expected performance of the economy in the second quarter of 2009, the global economy, especially that of the United States, remain in the doldrums and is not expected to recover till the end of 2010.
2. Over 70% of the private residential projects are bought by foreigners which contributed to the latest property boom from 2006 to 2008. With MNCs scaling down their operations and moving to cheaper destinations, the number of foreign buyers in Singapore’s property market is expected to decrease.
3. Rentals continue to fall in 2009 as the market cools down, with the most appreciable decline noted in the prime areas.
The average monthly rent for luxurious non-landed homes in Singapore fell 18.8% on a quarterly basis to $5.20 psf pm in Q1 2009.
For example, St Regis rents start at $7,500 for the smallest 1,507 sq ft three-bedroom unit and $20,000 for the 3,757 sq ft, four-bedroom unit, or around $5 to $5.30 psf per month. The average rent record for Grange Residences, a prime but slightly older condo, is at $6.20 psf per month at the end of last year.
Meanwhile, the average rents of non-landed homes in the prime districts fell 16.2% on a quarterly basis to $3.65 psf pm in Q1 2009. However, newer projects are still able to command rents of $4.60 psf to $5.00 psf per month. For example, the transacted rents for one-bedroom units of 690sq ft at the Sail @ Marina Bay now stand at $3,200 a month.
[Source: iproperty.com]
4. There will be a deluge of new projects which will obtain T.O.P. in 2009 and 2010 thereby exerting further downward pressure on the prices.
Based on these multitude of factors, it is highly unlikely that prices will continue to rise any longer. In fact, the market should be heading for a crash if it is not popped up artificially by the HDB resale market.
Singapore is the only democratic country in the world that has a huge public housing programme. Even china does not have a public housing programme that takes up 86% of all residential land.
Due to the sheer size of Singapore’s public flat segment, and the tendency for the government to intervene directly in the property market, home prices in general (excluding the high-end segment) tend to swing back and forth within a manageable range.
The recent HDB resale transactions in March 2009 have shown that buyers are paying prices high enough to prop up the S$600 per sq ft threshold for most mass market condo projects.
Flat buyers are paying between S$250 per sq ft to S$330 per sq ft just to own quarter-century old HDB resale 3-room flats in suburban areas such as Yishun, Woodlands and Hougang.
In Kim Tian Road, which is a short drive from the Central Business District (CBD), buyers would have to pay much higher per sq ft prices such as between S$450 per sq ft to S$550 per sq ft for six-year old resale 5-room flats.
[Source: iproperty.com]
The resale prices of Housing Board flats have risen by 10 to 15 per cent in the past one to two years, despite the recession that began in September last year.]
The HDB may have contributed to the spike when it decided to raise the valuation prices of its flats last year, saying it would help buyers as a lower cash-above-valuation payment would result.
While the cash request is slightly lower, the valuation price has leapt. The price of a four-room flat in Tampines is about $370,000 now, some $40,000 more than the price early last year - and this is largely due to the higher valuation price.
Instead of helping to stabilise prices, the HDB’s spike in valuation has been instrumental in increasing resale prices.
[Source: Straits Times, 14 July 2009
How much longer can HDB continue to pop up the resale market? Will it come to a day when a four room 99-year resale HDB flat in the suburbs fetch more than $500,000K on average?
Left alone to market forces, the prices of HDB resale flats are likely to plummet, at least back to the 2007 levels.
The astronomical prices of HDB resale flats help to support the prices of mass market condos which in turn ameliorate the expected plunge in the prices of luxurious condos.
Capitalizing on the profits made from the sale of their flats, HDB upgraders are able to afford paying over-valuation prices for private apartments and landed homes which in turn fuel the inflation of prices.
It is a vicious cycle which will eventually implode upon itself in the event of a crash in either the high-end or HDB resale market.
With the continued efflux of foreigners from Singapore, the high end market may crash sooner than later which will bring down prices drastically in the mass market condos and HDB flats in a domino-like effect.
The median prices of HDB flats will never exceed that of mass market condos. They are after all, public housing built by the government and they are supposed to be easily affordable.
Already, some HDB flats in prime areas like Bishan, Tanjong Pagar and Bukit Merah are fetching prices close to or exceeding that of condomniums in remote areas like Woodlands and Jurong.
Unless the prices for the mass market condominiums continue to increase, the present HDB valuation hike is untenable.
The ongoing “boom” in the property market may soon become a “bomb” for some when supply far outstrips demand precipitating a general drop in the prices.
Given the economic uncertainty plaguing the world and Singapore in the days ahead, it is advisable not to purchase a property now unless it is absolutely necessary.
It may be more prudent to sit on the fence and wait rather than to jump onto the bandwagon and get ‘burnt’ in the end.
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3 Comments on "Record private home sales: a boom or bomb in the making?"
True blue singaporean on Fri, 17th Jul 2009 10:56 am
Since independence, our hosuing pricing has always go upwards because it contributes into GDP numbers, which in turn translates to higher bounus to ministers besides the millions of taxes it can generates.
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btw.. just asking... if there were controls, will the same writers KPKB about it too?
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Quick question, wouldn't it hurt the people who are currently still paying their housing loans a lot if the prices of HDB dropped?
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Subprime mortgage crisis?
Have to service loan of 900K, but price of house now drop to 600K.
Arghhh!!!!!
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Originally posted by Ah Chia:
Subprime mortgage crisis?
A little different isn't it?The crisis was started when loans were too easily available to people who couldn't even pay their loans. They just took the loan and sit on it for a few months/years and resell it. I don't think HDB is so exposed to this sort of speculation.
I'm more curious of the effect if the HDB prices were brought down either through market actions or the changing of the government. Seems to me there isn't much of a choice but to let the price go up.
You piss off the people who are still paying the loans for the people who wants to buy new ones?
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deffered payment till T.O.P.
but still cannot bank loan
or price already drop!!!!
most bank require buyer to top-up another 20%
so buyer has to make decision now, to top-up another 20% or forgo last time down-payment amount 20%
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.... misjudgement.
thats why i nv made a purchase for a condo. even till now..
hdb is a great way of money.. ha..
now even hdb is going to be more expensive then condo in the years to come
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Good morning Uncle
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bomb or boom, why worry, just take the opportunity now, in fact, to be frank, every booming alway end with a big bomb,...so simple, all these writers are writing rocks and stones, who dunno, and those who post it and read it must be the most stupid nerd of all. Remember what goes up must come down ya, same goes to sex, stock market and my perky front etc etc...time to sell my property liao, may retire at 30yo.
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Originally posted by the Bear:
btw.. just asking... if there were controls, will the same writers KPKB about it too?
lol no need to ask. the ans is yes! one day say too much control, one day say need more regulation. our rights as citizens to bitch at anything!
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those who cannot afford but buy now in hope of flipping, good luck!
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those who cannot afford but buy now in hope of flipping, good luck!
Prices drop they die.
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Originally posted by Acidshuriken:
those who cannot afford but buy now in hope of flipping, good luck!
now whatever you have, sell!!! sell!!!, even if to live in forest, tents at ECP or bus stop, just sell it!!!, keep the money, later when it goes down, or bombed, then you buy...and with the money and interest earn, WOw! you get a cheap luxury house..yeah. But in the meantime, go homeless. -
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We are of the view that property prices will undergo a short term correction but will experience a long term uptrend
Primespace Fractional Ownerships
Fractional Ownerships in Prime Singapore Property
www.primespaceinvest.com
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property prices surge is probably due to:
1. surge in stock prices.
2. optimism of economy recovery
3. upgraders.
4. IR completion.
i think the main reason is optimism of economy recovery. possible? i think not. the current stocks prices are running ahead of economy recovery. what happen if economy is W shape recovery.
current sign of recovery is depends on govt stimulus and fed near 0% interest rate. how much more can US govt inject stimulus before they stop. the congress will not approve any more stimulus to reduce US deficit. if all this boosters are gone, and jobless rate dont recovered, what can propel the US economy forward whose GDP is mainly depends on consumer spending.
can spore recovery before US does? do we like china, india, europe who has a bigger domestic market to rely on?
no pain no gain could be on the thoughts on most property buyers now.
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Originally posted by reyes:
property prices surge is probably due to:
1. surge in stock prices.
2. optimism of economy recovery
3. upgraders.
4. IR completion.
i think the main reason is optimism of economy recovery. possible? i think not. the current stocks prices are running ahead of economy recovery. what happen if economy is W shape recovery.
current sign of recovery is depends on govt stimulus and fed near 0% interest rate. how much more can US govt inject stimulus before they stop. the congress will not approve any more stimulus to reduce US deficit. if all this boosters are gone, and jobless rate dont recovered, what can propel the US economy forward whose GDP is mainly depends on consumer spending.
can spore recovery before US does? do we like china, india, europe who has a bigger domestic market to rely on?
no pain no gain could be on the thoughts on most property buyers now.
Or it may well due to a portion of investors who were unscathed by the finanicial crisis, flushed with cash and nowhere to park their cash. -
hi 4sg,
i dont follow events concerning the private housing prices so maybe somebody could contribute who is buying up the houses that push up the prices.
anyway, i hope investors do their own maths before they commit to a condos that could still afford 20years down the road and not just 3 years down the road.
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Originally posted by reyes:
hi 4sg,
i dont follow events concerning the private housing prices so maybe somebody could contribute who is buying up the houses that push up the prices.
anyway, i hope investors do their own maths before they commit to a condos that could still afford 20years down the road and not just 3 years down the road.
The Singapore's private property market is somewhat unregulated as compared with the public property. Unregulated with regards to speculation. Rightly so, considering that it is a market for the wealthy, bold and daring.
There is a book in Popular Bookshop or MPH by this guy called Eric Cheng who made his fortune on the real estate. In one portion, he described how agents and speculators time themselves during the start of a boom market to ''flip" the market, driving price up and profit into their pockets.
Isn't it telling that in the the last quarter, there were record high number of property agents entering the market? -
hi 4sg.
as u said, this is for the rich and wealthy. i dont think we can say much about it. for those who aspire to upgrade into condos all i can say, do yr own maths lor. if u kena caught for another downswing, or kena retrenched, or banks demanded to pay the balance amount due to falling of property prices, then be prepare to pay or bankrupt lor.
i am heartlanders and would be happy if there is a rooftop above my head.
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Originally posted by reyes:
hi 4sg.
as u said, this is for the rich and wealthy. i dont think we can say much about it. for those who aspire to upgrade into condos all i can say, do yr own maths lor. if u kena caught for another downswing, or kena retrenched, or banks demanded to pay the balance amount due to falling of property prices, then be prepare to pay or bankrupt lor.
i am heartlanders and would be happy if there is a rooftop above my head.
if u kena caught for another downswing, or kena retrenched, or banks demanded to pay the balance amount due to falling of property prices, then be prepare to pay or bankrupt lor.You said it right, bro. This was what happening in the US's real estate.
The whole issue of sub-prime lending crisis (lending to people wtih no credit worthiness) has dragged the ordinary US working folks, along with the rogues speculators, to their knees with foreclosure, backruptcy and despair.
Somehow, many sheltered Singapore, good or bad times, can only see growth, growth, money, money and not the wisdom of your statement. -
yeah, the american who are caught by foreclosure can blame the bush adminstration that they dint clamp down on derivative trading or preventing high risk investment thru legislation.
but on the other hand, no one ask them to buy a house they cannot afford. all i can say is, invest with care and due diligence.
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Originally posted by reyes:
yeah, the american who are caught by foreclosure can blame the bush adminstration that they dint clamp down on derivative trading or preventing high risk investment thru legislation.
but on the other hand, no one ask them to buy a house they cannot afford. all i can say is, invest with care and due diligence.
same goes to mini bonds, nobody asked them to buy? but why banks who underwrite it need to hold responsibility for your investment?Bush should be sentence to death. He ruled by turning a blind eye with greed from those rich con bankers who supported him. And he left behind a legacy of a near total finanical and healthcare crisis that Mr Obama will have to sweep it clean.
Singapore Citizen on Fri, 17th Jul 2009 10:51 am
Will HDB flat easily cost 1 mil over the next 10 years ?