Table of Content
Property Price Index
Above is the Property Price Index from 2005 to 2020. It can be seen, each higher is higher than the previous high as you see in 2007 and 2015 period and each low is also higher than the previous low as seen in 2009 versus 2015. It is important to time the market correctly as the property is a big-ticket and highly leverage item. Each fluctuation of 10% can easily be $100k or more, depending of the quantum of the unit.
Just like stocks, buy on bad news and sell on good news often works well, though there’s alot of emotions to overcome. Just like SARS period, H1N1 and current Covid-19 situation. When market dip, its often a good time to enter, but market dip for a reason. Recession, retrenchment, pay cut, stock market crash with all other bad news on the market, and yes. That the best time to buy. On the other hand, when the market is good and everybody makes money, that the time to exit.
Demand and supply also play an important role in determining property prices. When there’s an oversupply, prices will dip as homebuyers are spoilt for choices. Where’s there high demand and lack of supply, prices will rise.
Time the Market
Supply
Demand
Depends on the nature of the property configuration and location, the different properties will attract a different type of homebuyers. Generally, it can be classified as either local or foreign demand
Local Demand
As seen from above, most private condos in Singapore are purchased by local people, with demand from HDB upgrades and en block millionaires. Most of local home buyers purchase condos in the City fringe (Rest of Core Central Region RCR) or Mass Market (Outside Core Central Region OCR), though there are some who buy into Core Central District (CCR) too.
With the rise of household income and also rise in HDB prices, especially for the DBSS HDB flat as most HDB owners sell their HDB to cash out the profit and move on to private condominiums that contribute to the rise in demand in a private property.
Past enbloc cases have also seen a new wave of millionaires as they went shopping for properties after their place got enbloc. With the profit on hand, most can choose to buy nearby condominium or even downgrade to HDB happily ever after with cash on hand.
Another source of local demand is the growth of population, both from new families and also new influx of foreigners becoming Singapore Citizen and Permanent Residence. Population growth expected to hit 6.9 million by 2030.
The rise in divorce cases too is expected to increase local demand with average household size drop from 3.5 to 3.3. As one divorce, instead of 1 unit, each husband and wife will need their own individual unit instead, further driving up demand.
Foreign Demand
There are many foreigners investing in Singapore Properties, the majority from Mainland China, Indonesia, Malaysia. Some of the factors why they choose to invest in Singapore Properties include Value for Money as compared to other cities,
Singapore Properties still Value for Money Compare to other cities
As seen from above Global Property Price Index, Singapore prices seem more value for money as compared to other global cities. It can be seen while other cities’ property rose in values, Singapore property prices depreciate since 2013.
This is in line with the Singapore Government policy to have slow and steady growth and not to crash the market through the implementation of cooling measures. In fact, there are a total of 8 cooling measures being implemented to keep the property price in check.
Strong Economic Fundamentals
Singapore’s strong economic fundamentals place Singapore in #1 ranking as rated by heritage.org.
Politics Stability
Singapore ranks #3 in political stability by World Bank. For economic growth, investment, trade to happen, political stability is a key component for growth. Singapore also tops 2 countries in terms of education. Skillset and education are a good indication of investment, trade, and economic competitiveness.
Conclusion
Exit Strategy
Homebuyers who buy a new launch in 2020, will become a resale unit after 3 years Seller Stamp Duty (SSD). All the new launches including those previous enbloc developments will TOP by 2023, resulting in a sudden drop in supply in 2024. When applying the fundamentals of Supply and Demand, when there’s a lack of supply on the market, it will drive the prices up in 2024 as seen in 2018 case.