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Download spiral of property prices is inevitable with the various cooling measures in place. Coupled with rising interest rates and drop in rental yield, there are now more sellers on market than buyers. Those who can wait is sitting on the fence waiting for good buy. Those who can’t wait, got to sell at a low price since buyers now are spoilt for choices.
Uncertain global economics conditions, steep decline oil prices further add on to the dark cloud hovering the property market sentiment as well as stock market.
Various organizations including The Real Estate Developers’ Association of Singapore (REDAS), CDL and Far East Organization has warned of a collapse of the real estate market if there’s a further deterioration in economic sentiment, be it in stock or property market. Upcoming supply on the marketing with lesser rental demand will risk precipitating a downward spiral of property prices. Rental vacany rate is at the highest now, the highest since 2005 as tenants now are more spoilt for choices with more developments coming on market with slower influx of foreigners.
Cooling measures are in place since 2009 to cool the property market as property market was heating up. Cooling measures include Seller Stamp Duty (SSD), Total Debt Servicing ratio, (TDSR), Additional Buyer Stamp Duty (ABSD).
The consequences of the cooling measures is eight consecutive drop in property prices since 2013. This is the longest decline streak in 13 years according to data from Ura Redevelopment Authority (URA).
Developers are worried as their land bank has been pretty depleted over the past few years. On top of that, market sentiments has not been good with much unsold units. Qualitying Certificate (QC) further add on to stress developers where they have to complete the project in 5 years and then fully sold the project by next 2 years.
Sellers are facing higher mortgage loan with higher intrest rates. Investors looking at rental are facing low rental yield and also low occupancy rate as tenants are now spoilt for choices.
Is the Property Marketing Really going to crash in 2016?
Think again. Previous market crash are cause by global economics reasons such as bankruptcy of lehman brothers, 911 incidient, bird flu etc. This time round, the property market seems to be more affected by goverment cooling measures which are more of a local than a global problem.
However as Minister Khaw Boon Wan mentioned “Collapse of the housing market beneits no one”. Government cooling measure in place is not to crash the property market, but rather, to have a more sustainable growth in the long run, with more afforable public housing for the elderly and newly wed, more affordable executive condominiums for newly wed couple.
So will 2016 be a good time to buy property? As Warren Buffett once said: “Be fearful when others are greedy and be greedy only when others are fearful”. There will be good buy on the market at this moment.
Consider Luxury Condo?
The various cooling measures impact luxury condo in the Core Central Region (CCR) most with more of them are high quantum, easily more than $4m. Buyers in this category are often from Singapore, China and also Indonesian. With Additional Buyer Stamp Duty (ABSD), foreigners have to pay additional 15% in taxes. Also, with Total Debt Servicing Ratio (TDSR) in place, buyers have to come out with more cash upfront with lower loan to value up to 50% for second property.
With the yuan growing strong against Singapore Dollar, there’s seems to have a growing chinese interest in Singapore Luxury Housing market. A unit at Le Nouvel Ardmore was bought by Chinese Billionaire for a whopping $51 million.
In the short term, this sector of Luxury Condo looks dull with not much demand and much supply coming on market. In the long run however, this sector is expected to pick up with more high nett worth individuals showing growing interest. In fact, the luxury cono market is currently showign signs of thawing with transactions volume slowly picking up amid depressed prices. Some of the best selling luxury condos include Urban Resort, Goodwood Residence and Leedon Residence.
How about 47% discount? Seascape was sold for $5.8m or about $5.2m lower than previous transaction with a total of 47% drop in value. Some other transactions are transacting 26 to 37% lower than their previous price. This could represent serious upside potential. As demand of luxury condos expecting to grow over the long term, this sector will provide more opportunity in times of market uncertainity and should reap better rewards when market recovers.
Resale and Executive Condo market to pick up pace
The recent increase in salary from $12,000 to $14,000 limited allows more newly wed couple to purchase executive condo. Buyers in this category also do not have to worry about ABSD as most of them are probably first timer. There are a few EC now on the market selling such as Sol Acres, The Wandervale
With the supply of mass market condo slowly decreasing over the next few years, more buyers might just have to turn to resale market. Resale market buyers often buy for own stay and thus does not have ABSD issue too majority.
