Bubbles Bubbles, but are they Trouble?

Many talks about the “property bubble” nowadays and that the inevitable will be coming soon to Singapore’s real estate market. But, if you were to consider this in context, what are the basis for such hype? Was it that the property prices are launching ahead despite the government numerous control measures? Or was it that the papers are always reporting the fantastic sales for new launches?

Why are the property prices ever increasing for almost three years straight on? When will the train loses it lustre? If you are in touch with the news, you would have notice that since the 1^st quarter of 2012, monthly property price index has been slowing down, and seems to be reaching a plateau. Objectively, this is a good sign for the buyers as this indicates a signal of the price stabilising. But if you were to take a step back, the more important question for buyers will be, “Is it a good time to buy?” I might not be entirely right, but dependent on the individual’s needs, wants and also the financial status, this could be a good time to consider getting that home that you have planned for (given the fact that most buyers had waited for almost a year for the price to drop – no thanks to financial reports at the start of 2012 forecasting the downturn of the market by at least 20%).

Why do I say that? Given the current global issues, we can safely say the world is pretty messed up – Europe is clearing up their backyard matters and America sweeping their dust under the mat. Of no surprise, Singapore can be considered as one of the more stable and “hassle-free” country right now (Actually, we could have been like this for a long time – do a Google check on this). And comparing the various financial tools (equity, FOREX, bonds etc) available, despite this recent bubble-bubble hype, property seems to be the most stable and might be the most profitable of the batch. Less the disadvantage of ill-liquidity, which other platform is able to help secure a growth rate better than your CPF interest rate of 2.5% annually? The key word here is “secure.” Furthermore, in the South East Asia region, the only two property market presently stables enough to consider your dollars and cents would have to be Singapore and Hong Kong. See the government interventions as positive and active interactions; logically, if the market does not have potential, such events would not have happened. The government understands that the property market forms part of the backbone the economy growth and its’ intervention is necessarily to SLOW DOWN (not stop or reduce) the growth, so as to pro-long the valuable returns to the country.

There have also been forecasts with regard to the expected declining volume of property transaction in Singapore till end of year – but does this mean that the prices will fall? To the common minded, this is usually the first thought when the topic is raised. However, if you were to take a closer, you might realise that FALLING VOLUME DOES NOT necessarily equate to the fall in prices. An instant would be the continued land sales by the government for residential development, and a good example would be the site next to Sky Habitat in Bishan. Sky Habitat is currently going for an average of $1700psf; what do you think the new site will cost? If nothing goes wrong, the site at Bishan would be sold at a price higher than that for Sky Habitat, and subsequently this would mean apartments going for higher than an average of $1700psf. If not, why would any developer buy the land if no basic profit is insight?

I am not saying that the market will never fall, but that the inevitable correction would be minimal. If you are an investor, I would recommend continuing to observe the market and be aware of the trends. Watch out for tell tale signs of the market picking up steam again when the current sentiment sets in. But never let history repeats – don’t over-wait till the next government measure. The most recent one proved to be one that affected investors more than others. And if you are buying for own stay, now may be a time to purchase your unit of choice, as this could be the new low in the coming years. Even with the correction insight, it’s effect would be expected to run out by the time you are selling the property without a penalty