S’Pore Property Crash: When And How Serious?

[therat 18]

http://sg.news.yahoo.com/blogs/singaporescene/pore-property-crash-serious-095330844.html

This property-crazed city of five million seems ****-bent on disproving the old theory that what goes up must come down.

Despite warnings of a possible crash, land-squeezed Singaporeans and rich foreigners are still buying private (as well as resale public) homes at red hot prices.

Shrugging away a number of cooling measures, the property bull — which became active in 2005 — has continued to charge, albeit at a slower pace.

A recent prime condo traded at a new record high of S$5,842 psf. Prices had shot up another 17.6 percent in 2010, setting off alarm bells of a bubble building.

It is giving Minister for National Development Khaw Boon Wan nightmares. Last month he warned that the market could head for a possible collapse because of vastly increased supply.

Most analysts agree that a blow-up is coming but disagree on the intensity and timing. One said it could happen as early as 2013.

However, there doesn't seem to be any real fear. Singaporeans and foreigners, who made up 29 percent of buyers last year, are still opening their cheque books to developers.

"People have short memories. Tell them prices will fall, they will laugh. Remember the property crash of 1998? It only fully recovered after 12 years," reminded Clinton Lee.

"History would repeat itself. It happened in the 1990s and would happen again," said a blogger.

Fundamentals believed to be supporting high prices

The fundamentals — low money costs and high immigration — however, continue to convince many Singaporeans and foreigners that property still makes good investment. For simplicity, this article excludes public properties.

There are two reasons for this traditional craze. Firstly, land in Singapore is scarce and finite.

Secondly, it is considered a good investment because, while supply is limited, demand will grow as long as there is economic growth and stability.

Some 20 years ago, the population was three million; it is now five million, up 40 percent. Not surprisingly, property values more than followed.

(The private property price index has jumped from 33.3 points in 1980 to 202.8 points in 2010)

In most other countries, people generally buy a home for long-term residency, and they sell only if they get a job in a distant place.

But a large majority of Singaporeans who can afford it often sell their home for another "to take profit" — or to upgrade or downgrade.

This is not new, but has in recent years been joined by a plethora of foreigners, including mainland Chinese, Indonesians, Malaysians and Indians.

A survey some years back found that 53 percent of Singaporeans had moved homes at least once in the previous 10 years. Reasons: upgrading, downgrading or speculation.

Several thousands migrated abroad.

Owners plan to 'flip' homes or rent them out

The value of private homes gave investors a real return of 8.6 percent a year between 2005 and 2010.

The attitudes and lifestyles mean that residential homes are seldom permanent for the new generation. If they are not sold off, they are rented out to foreigners.

The spiralling market has created a traditional speculative fervour among many owners. Most do not hesitate to sell their homes for a profit and buy another on downturns.

Tens of thousands of ordinary Singaporeans — from secretaries to doctors — hope to "flip" homes the way they do shares.

Like stocks, they sometimes lose, and lose big, as when the balloon burst in 1996. Values dropped by 38 percent, wiping out billions of dollars in citizens' assets.

The phenomenon had occurred elsewhere in developed cities like Tokyo, Hong Kong, Paris and Brussels, some of which had crashed even more dramatically.

There are also many short-term bankrupts who borrowed and bought high before a downturn.

One analyst observed that people who bought private properties in 1996 were actually getting a negative real return of 0.6 percent as of the end of last year.

Rising beyond the reach of ordinary folk

The rocketing prices have moved private property ownership out of reach of most fresh graduates setting out in life. If they are lucky, they may get a government flat.

In some cases, they are an obstacle to young couples getting married or raising children.

Data shows that from 1990 to 2008, private home prices tripled, while household incomes only doubled.

This implied that private homes were significantly less affordable now than 20 years ago, since the rise in home prices had outstripped income growth by 50%.

At the moment, investors are smiling. Property websites have had more than their fair share of optimism recently.

A condominium bought for S$600,000 at the beginning of 2010 was reportedly sold at a profit of S$100,000 within 12 months.

Some home-seekers are staying by the sideline, preferring to wait.

Scenario of a property crash

In a full blown world financial crisis impacting Singapore, money could leave the country, property buyers disappear and the stock market crash.

There could be tens of thousands of empty condos looking for foreign tenants, and the consequences would reverberate throughout the economy, especially in stocks, banks, cars, jobs and higher bankruptcies.

Many passive homeowners may pay a price, too. Boom or bust, it will not have a lasting effect on people's lives — which will recover, but for some, only after years.

They will always evolve around property, public or privately-built.

One factor will not change, however: Private homes will be harder for the young generation to own.

Meanwhile, the buying and selling continue, with prices remaining high pending any further government action.

Property researcher Getty Goh asked in a crucial headline question: "Property 2013. Buyers versus sellers: Who will blink first?"

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have some fun.

Crash or no crash

[HappyHouse88 0]

hmm.. i believe the mkt is going to correct itself very soon. Given the recent data.

As to what extend will the moderation.,I think it will moderate to the level where most ppl can "afford" assuming they dont earn for selling their current pty. Which some ppl believe is 5 times their annual salary.

So assuming a average 5-rm flat household earns 96k per year.

An affordable loan amt will be $96x5 = 480k and assume they do not have any excess cash/cpf from prev pty.

They could only afford a pty ard ~$550k for a 5 rm flat.

Mass mkt pte pty, i will think it will correct to median price of 700k whereby affordable loan abt is ard $120k x 5 i.e. 600k. EM , EA at good location will also hover ard this price.

Edited July 21, 2011 by HappyHouse88

[gimz63251073 0]

uh to me, there are only booms and crashes.

the so-called moderation is just part of the process where booms and crashes occur.

If property does indeed crash, many jobs will be lost, pay will be cut, etc... Not a good sign.

Must prepare oneself for contingencies...

[HappyHouse88 0]

So what do you call 2008-2010 ? Crash ?

2002-2007 ? boom?

As long there is high employment/ low interest rate, there will not be a crash. However, it is possible that rental demand to drop and individual finding hard to pay installment + maintenance for their investment. These ppl will sell off their pty at a disc to "cut" loses. Since ppl had to pay upfront > 40% for their investmen and interest rate remain low.

HDB will probably not drop because it's within the "affordable" range for most household.

Edited July 21, 2011 by HappyHouse88

[gimz63251073 0]

to say whether its boom or crash, we can only see it after everything is settled and when we look back at events.

some say 20% drop is crash, others say 10% is crash. others say 50% then considered. whatever, no proper definition anyway. So why bother. Its purely academic.

every crisis needs a spark. right now, we are all waiting for a significant event to trigger the crash. Not likely to come from US though, as US will surely increase debt ceiling. They can probably last half a century before defaulting. Maybe China or Euro.

[godloveyou 0]

every crisis needs a spark. right now, we are all waiting for a significant event to trigger the crash. Not likely to come from US though, as US will surely increase debt ceiling. They can probably last half a century before defaulting. Maybe China or Euro.

Dark clouds formed and flowing from WEST, going to whole world, you know.untries

- USD 14.4 trillions are no play play, divide this by all americans citizens, you know each has to "pay" how much? Still want to increase ceiling = ask bank to increase one's credit limit, so one can spend more. Spending has been > GDP for many yrs...China already gave "warning". Japan, UK and brazil still diam diam.

- Greece face another rounds of debts due Aug & Sept.

- Italty issued bonds with high interest, you know.

- Look at how argentina and then russia become bankkrupt

- Portugal/iceland/spain

All these "west countries" have been over spending for yrs, now "No money" to pay debts.

Nowaday, companies "very scare" to have any business association with these problematic countries, you know.

BT reported Yangzhijiang's clients are 70% european-based, share price dropped.....

What I'm trying to tell is: big globl economic problems have formed in the WEST and the "snow ball" is rolling towards the east. Companies will close down, ppls lose jobs, no money to pay instalments, spend less...everything in a loop= recession.

The spark already ignited in the west since the subprime, lehman brother......

[leechaorui 2]

For the individuals, I think it is better not to live within our means. When I was at condo showrooms, I saw many young people looking to buy condo units costing $1.xx million. These are the mass market "affordable" type of private housing and not those in the prime area.

Not sure what are the buyers' earning capacity. Certainly, the interest cost repayment each year is very high if these buyers finance a huge part of their purchase price through the bank. A mortgage consultant shared with me that many of the buyers will never be able to repay their housing loan. They took 30 to 35 years loan and are basically paying only interest and each time, they refinance their loan at the expiry of the loan contract, it is renewed for another 30 to 35 years term. The buyers are hoping for capital appreciation and in the meantime, enjoy a beautiful condo.

If a crisis arrive at our shore, I think many of these people who are highly geared will be in serious trouble. Like the earlier postings, jobs are not secure, interest rates may rise, huge supply of apartment kind of housing in the horizon, slow down of immigration to Singapore, etc... may lead to very tragic outcomes for those who are caught.

[matrix0405 0]

Other than the 1st sentence, leechaorui gave sound advise. These young couples slurping up $1M condo have to be more prudent. The rosy situation now can deteoriate toward the end of the year. Unless two persons fully employed, else a $3 - $4K installment hanging over your head is very uncomfortable.

[Ladysasa 0]

Over the previous crashes, many people have to dump their properties due to lower valuation or top up or the fear of missing the boat. Once the bear steps in, its non stop sliding until the Gov put a hand in it. More often we'll see bank auctions.

China slowed, the big West have trouble getting the debt ceiling raise due to muscle flexing for next election, Sing manufacture also down. Will have to get ready.

[HappyHouse88 0]

For the individuals, I think it is better not to live within our means. When I was at condo showrooms, I saw many young people looking to buy condo units costing $1.xx million. These are the mass market "affordable" type of private housing and not those in the prime area.

Agreed.

[HappyHouse88 0]

Over the previous crashes, many people have to dump their properties due to lower valuation or top up or the fear of missing the boat. Once the bear steps in, its non stop sliding until the Gov put a hand in it. More often we'll see bank auctions.

China slowed, the big West have trouble getting the debt ceiling raise due to muscle flexing for next election, Sing manufacture also down. Will have to get ready.

Yes.. these few days, there are many lousy econ reports. I think the time is nearing liao.. And developers knows it.Many enbloc no go.

[HappyHouse88 0]

http://sbr.com.sg/residential-property/news/47-residential-units-remain-unsold

this report say...things is not looking good..

[pantieileen 2]

Aiya any crash will only benefits the ah nehs and ah tiongs who will happily come and buy our resale flats and condos.

Even if our economy tanks, our property will stay sky high thanks to them. Everyday i receive flyers "chinese pr, indo chinese pr, hk pr, indian pr sincerely looking for house, condo, hdb flat in our area...."

Just look at bangkok, people are waiting for the kxxx to mati then whoop in and sweep up cheap condos with infinity swimming pools for vacation homes or retirement homes.

Only those real young true blooded Singaporeans will suffer if they lose their jobs and have to pay for their 1.xx million cubicles in the sky. But will our govt care? no loh wait long long

[gimz63251073 0]

i have realised that living within means do have varying standards.

i would consider buying $500k flat with $8k salary as "living on the edge" or "working your life for HDB".

of course, different stroke for different folks.

Are bangkok condos any good? i love BKK street food, shopping and cheap massage!

[pantieileen 2]

Are bangkok condos any good? i love BKK street food, shopping and cheap massage!

I like these few coz of the following reasons but all still quite ex. Coz at night can just walk to the nearby Silom massage, street food, buy pirated dvd etc

http://www.met-bangkok.com/

infinity swimming pool on the 9th floor, maciam like MBS heehee, 2gyms on level 9 and i think level 23 (forgot exact floor)

Right behind Singapore embassy so i think anything just run there should be safe?

Most residents are expats coz i talked to a few of them, maciam they got their own little community

Near to hospitals so if i grow old i need healthcare can easily hire some thai maid and a chauffer and drive me to hospital nearby or even roll me across the road to hospital.

It's abit like Icon at tanjong pagar but then abit far from chon nong si bts (must walk abit and climb the sickening bridge)

http://www.rcr-bangkok.com/

Also around the same area but i think more ex. Haven't make appt to look at the showroom in singapore yet.

I think this one walking distance to bts

Sky Villas @ Ascott

Right above Ascott Bangkok, so actually there's like a 24/7 concierge for lazy people like me. Almost everything in the apartment (massage, facial, gym with yoga and pilates classes, hair salon, restaurants). The swimming pool is abit orbid compared to all these infinity pools

The Infinity

Opposite Chong non si bts, actually the above 4 all in the same area lah coz got easy banking at my fingertips (except Citibank which moved..haiz)

It's actually right opposite bts but i don't remember i can hear the train "cong cong cong" sound. Maybe their train frequencies not very high. The swimming pool also "infinity" style. but ok i cannot swim but then look chio i lie by the chair also shiok, ok maybe i'm a sucker for infinity pools