Seeing 2011

What has 2010 been for the Singapore Residential Property Market?


2010 has been the period whereby some important policies had been introduced to the Singapore’s property market. The most significant being measures to curb the property fever. Known to many, Singapore’s overall property market has always been following Hong Kong closely. Similar to Hong Kong, Singapore is also seen as one of the best property investments in Asia with good capital appreciation potential in 2011 of about 10-20%. In 2010, both government bodies had introduced various policy to prevent the any bubbles forming, such as the 15% stamp duty fee for any properties sold within 6 months of purchase and a 50% down payment for properties S$2 millions and above in Hong Kong. And in Singapore, similar effective measures are taken, such as reducing the maximum bank loan from 80% to 70% for properties purchased after the first and also the implementation of up to 3% stamp duty for properties sold within 1 year of purchase.

Despite the new cooling measures setting in, the market seems to had only slightly shifted. With still many strong buys, especially foreigners and Permanent Residences snapping up one in three private properties in November 2010 and at new price peak. This is where the second most significant event for Singapore’s property market steps in – the regulation of the property agencies. A new body, Council of Estate Agencies (CEA), has been set up to regulate property brokers in Singapore during the second half of 2010 to ensure that all brokers to be licensed by 2011. This is very much similar to the insurance market some years back, which provides more transparency. This is definitely a sound measure as the barrier to entry is now greater and chances of brokers committing fraud will be expected to be much lower as their licences are at stake, with a fairer play in the market.


Hold on tight, 2011 is just by the corner.

The number one question that comes to investors will always be “How will the market be like react next?”

The property market goes through a continuous series of highs and low, with occasional unforeseen plunges or hike, like the financial crisis in 2008. Many often talk about how some periods are “perfect” opportunity to either sell or buy – this is an urban myth. There will never be a “perfect” time. Buying at the bottom and selling at the peak of the market is often by chance. But this does not mean that one should start buying or selling without considerations. Every piece of information is a guide and so is this article.

Every market move through a standard form of pattern, and chances are that they will replicate history. For 2011, it is advisable to start monitoring the happenings in Hong Kong. With the new measures and prices, real estate might be slowly losing its edge to more liquid assets, such as equities. Return on investment, though is higher for the estate segment, takes relative longer period to yield, especially the high end markets. This will be particularly obvious during 1Q 2011 when fund managers and equities brokers return from their year-end extended breaks.

However, with the current interest rates at all times low, it is still attractive to grab a piece of the pie, especially non-TOP projects. This phenomenon tops the property market towards the end of 2010 with attention mainly at new launches. How will this affect the entire market? Not so much for 1H 2011 but more towards 2H 2011, with as much as 150% more projects expected to be TOP in year 2012 and 2013. This sudden surge of supply as compared to 2010 and 2011 will inevitability slide the buying fever.

Are we looking at the bubble bursting? Odds are low. To put in proper terms, there is no bubble to start off. While many see today’s property market as start of a bubble, they are overly focused on the speculative fragment. The property market can be divided into two main sectors – the home-owners, people who buys for the purpose of own stay, and investors. And within the investors, there are the long terms, short terms, capital-focused and yield-focused investors. In the event that the buying fever was to slide as predicted but if the interest rate remains attractive for 2011 as it is for 2009 or 2010, the impact might still be cushioned with investors still having a reasonable holding power. This will leave us with a portion of the market that will be affected – the speculators which make up roughly 15% of the entire Singapore market.

Year 2011 will be an exciting year with some minor corrections expected towards the latter half of the year. With the cooling measures fully set in, we can expect to see more stable transaction volume and prices with speculators reducing their holdings in the market.