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Monday, October 4, 2010
Overview of Singapore's Property Market in the Next 6 Months
There has been a steep recovery for property prices in the past few months. Looking ahead, investors are faced with two questions: what can be expected of the property market in the next 6 months and what does it mean for them?
According to our in-house indicators, property prices will continue to increase, but only in moderation. The sustained increase in property prices can be attributed to several factors, one of which is the general positive outlook on the economy in Singapore and in Asia. Singapore's economy grew a robust 15.5% on a year-on-year basis in Q1 2010; meanwhile the Ministry of Trade and Industry (MTI) projects a healthy 7% to 9% GDP growth in 2010. These indicators point toward an economy on the up-swing and possibly better job prospects, thus fuelling demand in the property market. In fact, according to URA, the volume of transaction for private homes increased 25% in April from March to 2207 units. Also, a recent poll by PropertyGuru shows that 70% of potential homebuyers will purchase a property in the next 24 months, evidence that homebuyers' demand for property can still be sustained for the next 2 quarters.
Another factor contributing to the sustained increase in property prices is the recent opening of the two Integrated Resorts (IRs), Resorts World Sentosa and Marina Bay Sands, which casts a spotlight on Singapore and serves as a catalyst in attracting potential global investors to Singapore's property market. It is hopeful that these investors are suitably impressed with Singapore's sound infrastructure and political stability and want to invest here, hence fuelling demand for luxury residential and commercial projects and pushing up property prices.
We might also consider the recent opening of MRT stations on the Circle Line as a contributing factor, as they serve to increase the value of residential homes nearby.
However, one should note that this sustained property price increase will only occur in moderation due to several downside factors, one of which is the Eurozone Greek debt crisis. Given the uncertainty faced by the European economy and its domino effects on the global economy (and subsequently the Singapore economy), investor confidence might be rattled. Doubts cast on job stability could force investors to reconsider purchasing a property, easing demand on property and dampening any excessive price increase.
Another factor that might impede the growth of property prices is the anti-speculative measures introduced by the government in September 2009 and February 2010 to prevent the property market from over-heating. These measures have since gained traction and serve to stem excessive growth of property prices.
To conclude, property prices have been on the rise and will continue to be, albeit in moderation, due to an uncertain global economic outlook attributed to the Eurozone Greek debt crisis and anti-speculative measures implemented by the Singapore government. We feel that a conservative stance should be adopted and advise investors to tread with caution because the investment objective of capital appreciation might not be substantially met. However, this does not entirely rule out the possibility of investing in property for the next 6 months. Long term investors such as homebuyers or investors banking on rental income may still consider the option of purchasing property.
Ascendant Assets - About the Author: The above article is written by Tan Shu Xian, an intern with Ascendant Assets Pte Ltd. Shu Xian is currently in her third year of study at National University of Singapore (NUS), Faculty of Science.