In a recent survey I carried out to Propwise.sg subscribers, 66% of the 269 respondents believe that the current fourth round of property control measures by the government are sufficiently harsh to prevent 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 result of the measures, a sharp contrast to the majority of analysts who had forecasted continued property price appreciation for this year before the measures were announced. Many believe that the measures would severely restrict the buying pool to just new home buyers, making it difficult for investors, speculators and even some upgraders from buying.
Of the 29% of respondents who thought that prices would still continue to appreciate in 2011, the low interest rate environment, strong economy and low unemployment levels were cited as reasons for the continued strength of the market despite the measures.
31% of respondents were putting off any further property investments for the time being due to the measures, suggesting that the near term pool of buyers and thus strength of demand would be weaker going forward. On the selling side, only 7% of respondents were looking to sell their property soon before the market got worse, possibly a result of the strong balance sheet of the sellers. With buyers holding back and sellers not desperate to sell, transaction volumes are likely to plummet, making the life of a property agent difficult indeed.
The measures were also criticized by some respondents for preventing genuine 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.
Investors would also be forced to think hard about keeping their property for the long term as they cannot expect to flip it for a profit upon TOP as they did in the past – their focus will have to shift from capital appreciation to rental yield. Also, with the higher downpayment requirement for a second and greater mortgage, the return on capital will have declined, making property a less attractive investment for some.
There was also some feedback about how the measures have not differentiated between locals and foreigners. In fact, some believe the measures actually tilt the playing field in favour of cash-rich foreigners who could then take advantage of any weakness in the market to pick up more properties at bargain prices.
Interestingly, long term investors have not been deterred by the measures – 55% of the respondents were keen on making a property investment if prices fell. The main issue was on how severe the fall in prices would be. Unless there was an external crisis of some sort, the situation was not likely to be as bad as during the Asian Crisis post-1998 due to the ample liquidity in the system. Some respondents thought a fall in prices of 10% to 15% would be sufficient to lure them back into the market.
Some interesting comments from respondents
“As long as Singapore economy is still doing well and the low interest rate environment is still there, property will continue to do well too. Unemployment is very low plus incremental wages are all fee good factors. Don’t forget, stock market will continue to do well this year as 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 small and hence affordable, in terms of $psf, it is a quantum leap. This gives the developers the boldness to keep raising their prices to well beyond $1,000 psf even in far-flung places as Choa Chu Kang and Yishun on 99-year leasehold land. The government should therefore forbid the building of homes below a certain built-in area. Having said all this, I am more than convinced that current prices are highly inflated and not sustainable.”
“I think it is not so much of preventing a property bubble as we are already in a bubble. It should be more of how to downsize/deflate the bubble gradually without bursting it.”
“Now that I can no longer make money investing on properties in Singapore, I will be looking more actively on overseas properties (ie. UK).”
“Speculators’ sentiments will be dampened but hopefully first-time 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 while, at least for this year. After that, anyway, it’s 2012. We need not worry about property prices when the world is coming to an end, do we?”
Thanks to all who participated in the survey – I hope the results are interesting and beneficial to all. Have further (respectful and considered) thoughts and opinions? Add them to the comments below!