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Thread: Residential price recovery has overstayed its welcome

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    Default Residential price recovery has overstayed its welcome

    http://www.todayonline.com/Business/...ed-its-welcome

    Residential price recovery has overstayed its welcome

    by Tan Chin Keong

    04:46 AM Apr 15, 2011


    The Singapore residential property market has had a very strong recovery since mid-2009 and prices are hitting record highs. However, the recovery has also prompted the Government to announce four rounds of residential property market cooling measures since September 2009.

    The harshest so far has been the latest round introduced in January, consisting of further hikes in the seller's stamp duty and reductions in mortgage loan-to-value ratios.

    The cooling measures have caused cracks in the market. Private residential sales volume and price gains have recently slowed and we see potential downside for prices in Singapore. Mass market private properties, which have led the current recovery, could fall 10 to 15 per cent this year, while prime properties could lose zero to 5 per cent. Our cautious outlook is predicated not only on the harsh cooling measures but also on a number of structural drivers of the current recovery that we believe could turn negative over the next one to two years.



    Current recovery driven by a confluence of supportive factors

    With little doubt, Singapore's strong economic growth and record-low interest rates have been the two main drivers of the residential property market recovery. The stellar 14.5 per cent gross domestic product growth last year has resulted in strong employment conditions and higher salaries, which in turn boosted home demand. Meanwhile, record-low interest rates have helped keep mortgages affordable despite rising property prices.

    Another driver for the recovery has been Singapore's steady population growth. From 2000 to 2009, Singapore's successful repositioning as a global city and its liberal immigration policy ushered the population to grow from 4 million to 5 million - an annual growth rate of 2.4 per cent.

    Amid this steady increase, the supply of residential property units actually plummeted. In 2000, about 37,000 homes were completed, of which some 28,000 were Housing and Development Board (HDB) flats, and 9,000 were private residential units. However, the total number of completed units fell to a low of around 9,000 in 2006 (HDB 3,000; private residential 6,000), and a still-paltry 17,000 in 2009 (HDB 7,000; private residential 10,000).

    The culprit, in our view, was the HDB's adoption of the Build-to-Order scheme in 2001, which significantly slowed down the HDB flat construction process.



    Supportive factors expected to wane

    We believe these market supportive factors will wane. Singapore's economic growth is expected to slow down to between 4 and 6 per cent this year as export growth tapers off, and employment and income growth, though healthy, may not be as strong as last year.

    And while interest rates could remain depressed, they will not stay low forever. In recent speeches, United States Federal Reserve officials have reignited market concerns about the end of quantitative easing and the eventual tightening of monetary policy.

    Given that Singapore interest rates tend to follow US interest rates, the day of reckoning for mortgages in Singapore may not be far away. UBS expects the Fed to start hiking rates in the first quarter of next year, which means Singapore interest rates could also rise early next year.

    The Government has also tightened some of its permanent residence policies, resulting in a drop in the annual population growth rate to 1.7 per cent last year. Foreign worker levies will also be raised further as announced in this year's Budget. All this would mean that population and housing demand growth should slow.

    In addition, the HDB has been very active in launching new supply of public flats over the past year and this should result in a significant increase in completed HDB flats by late 2012 or early 2013. We estimate that 16,000 HDB flats would be completed in 2013.

    In the private residential property market, the Urban Redevelopment Authority has been actively launching new sites, especially mass market ones in suburban areas, through both its confirmed and reserve lists. This should help address the residential property supply shortage that has built up in recent years.

    For these reasons, we expect Singapore residential prices to decline. For potential home-buyers, this means a potential price relief. For investors, better returns could be achieved this year from office and industrial property exposure, where rentals have continued to rise recently driven by healthy occupier demand.



    Tan Chin Keong is an analyst at UBS Wealth Management Research.

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    It is quite alarming that while in 2000, HDB built more flats for Singaporeans than the private sector, in 2006, the number of completed HDB flats was miserably lower than private houses. This trend probably lasted through to 2009. This is a clear indication that those couples who needed to buy during this period of time had very limited choice. BTO!!!

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    Good observation... How can hdb constitute 80% of singapore housing but build less than condo?

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    This guy very brave huh, predict 10 to 15% drop this year alone in mass market prices
    The last report I read from CLSA predicts 5% drop only.

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    mass market condo selling at $1200-$1300 after dropping 10% is still $1080-$1170. Scant consolation.

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    When will OCR prices surpass not so prime CCR prices?

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    Quote Originally Posted by CCR
    When will OCR prices surpass not so prime CCR prices?
    in terms of PSF....'prime' OCR oredi surpass those old old CMI CCR

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    When such thing happen, we know OCR TOP (not "T.O.P." but PEAK) liao!

    Quote Originally Posted by devilplate
    in terms of PSF....'prime' OCR oredi surpass those old old CMI CCR

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    Quote Originally Posted by teddybear
    When such thing happen, we know OCR TOP (not "T.O.P." but PEAK) liao!
    hehe...how abt OCR MM.....super peak peak? hehe

    even cheapest super cui 8courtyard 1bedder priced close to 1kpsf

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    History will always repeat themselves, but in another form that is not so easily recognizable. The gullibles are always the gullibles putting themselves on the chopping board. They will never understand that CHEAP or EXPENSIVE is not based on the absolute price......

    Quote Originally Posted by devilplate
    hehe...how abt OCR MM.....super peak peak? hehe

    even cheapest super cui 8courtyard 1bedder priced close to 1kpsf

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    we're going the way of hk much earlier than expected.

    turn left, kok into shoerack, turn right kok into sofa.



    Quote Originally Posted by devilplate
    hehe...how abt OCR MM.....super peak peak? hehe

    even cheapest super cui 8courtyard 1bedder priced close to 1kpsf

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    Quote Originally Posted by McKinnon


    we're going the way of hk much earlier than expected.

    turn left, kok into shoerack, turn right kok into sofa.
    Actually the super MM cannot have sofa and shoes... You put bed on baywindow. One small table and one small wardrobe. Nothing else... Standing in the centre of the room, you can stretch your hand to touch the kitchen and toilet door as well.

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    Really dread this new MM phenomenon.... Make our city no class.... People will laugh at how miserable Singapore is.... I was once so proud that we are a small island but can accommodate so many people yet have nice comfortable homes to stay and nice open spaces.... All these are going away with over crowding everywhere

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    Actually what determine the desirable population size in a country? Is it the demographic needs? Like in 15 years, there'll be 30% people above 65 years old so we'll need another **% to help take care??? If its purely replacement ratio, then the number just have to stay constant for next many years can already? Just bring in foreigners to cover the pathetic birth rate in the country can already?

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    We're living in a city of hotels at the rate of MMs are built.

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    Quote Originally Posted by kane
    We're living in a city of hotels at the rate of MMs are built.
    not so bad la....MM projects usually boutique apts mah....those big projects so far still good size even though 2bedder shrunk to 7xxsqft

    one project like 8courtyard oredi 600 + units of gd size units ........each geylang MM project about 50-80units+-.....total about 8-10 such MM projects equal to 1 8courtyard wor.....dun be so alarmed

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    so assuming this comes to singapore, does that mean there are people who will actually rent such a shoebox condo versus a 3 room hdb flat?


    Quote Originally Posted by ysyap
    Actually the super MM cannot have sofa and shoes... You put bed on baywindow. One small table and one small wardrobe. Nothing else... Standing in the centre of the room, you can stretch your hand to touch the kitchen and toilet door as well.

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    Quote Originally Posted by devilplate
    not so bad la....MM projects usually boutique apts mah....those big projects so far still good size even though 2bedder shrunk to 7xxsqft

    one project like 8courtyard oredi 600 + units of gd size units ........each geylang MM project about 50-80units+-.....total about 8-10 such MM projects equal to 1 8courtyard wor.....dun be so alarmed
    So many precious land at spottiswoode and anson road used to build a big number of MMs. Well, that's just my opinion.

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    Quote Originally Posted by kane
    So many precious land at spottiswoode and anson road used to build a big number of MMs. Well, that's just my opinion.
    Small is beautiful. Make small, sell high, sure will make someone happy. Last owner worry only.

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    Singapore want to be world class city right? In world class cities like new york, london, tokyo, MMs are common.

    World class city (wanna be) = world class prices (not there yet) = smaller units (happening now) = MM (viola!).

    This is just the beginning.....

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    Quote Originally Posted by McKinnon
    so assuming this comes to singapore, does that mean there are people who will actually rent such a shoebox condo versus a 3 room hdb flat?
    I rather rent 3 room hdb buy better furnishings to spruce up e place but if mm I cannot stand it sure claustrophic!!

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    Quote Originally Posted by extremme
    I rather rent 3 room hdb buy better furnishings to spruce up e place but if mm I cannot stand it sure claustrophic!!
    Bachelor pad ard 600sqft in prime location sounds like a good idea. Tons of successful 30++ single women/man ard. Feel there is a market for this group of individuals. 600sqft in D10 quiet corner + 2 seater convertable. Lifestyle man!

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    Quote Originally Posted by extremme
    I rather rent 3 room hdb buy better furnishings to spruce up e place but if mm I cannot stand it sure claustrophic!!
    ya manz.. rental for a 3room hdb is 2k-2.4k in some location.

    buy and throw into rental market.

    meanwhile if opportunities come, condo just buy in parents' name.

    best of both world.

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    some of the three room flats have been transformed to look really really nice. only no security guard and swimming pool.

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    Quote Originally Posted by kane
    some of the three room flats have been transformed to look really really nice. only no security guard and swimming pool.
    So?

    Who cares when u lock your front door and don't swim. The internal space is the same private space everywhere in the island.

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    Quote Originally Posted by kane
    some of the three room flats have been transformed to look really really nice. only no security guard and swimming pool.
    Just find a HDB flat right beside the swimming pool and gym. Go down can access these facilities le. Buy a security system from cisco. As good as condo le. However, it is the surrounding area like corridor and carparks that you really cannot do anything about it. Plus the fact that people will just come and throw rubbish advertisement into your house or come sell ice cream, etc. These stuffs remain.

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    Heard lots of complains about urinating in HDB lifts.


    Quote Originally Posted by ysyap
    Just find a HDB flat right beside the swimming pool and gym. Go down can access these facilities le. Buy a security system from cisco. As good as condo le. However, it is the surrounding area like corridor and carparks that you really cannot do anything about it. Plus the fact that people will just come and throw rubbish advertisement into your house or come sell ice cream, etc. These stuffs remain.

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    Quote Originally Posted by teddybear
    Heard lots of complains about urinating in HDB lifts.
    There you've heard it... its not a myth... its here to stay... in lifts, carparks, everywhere...

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    Quote Originally Posted by sh
    Singapore want to be world class city right? In world class cities like new york, london, tokyo, MMs are common.

    World class city (wanna be) = world class prices (not there yet) = smaller units (happening now) = MM (viola!).

    This is just the beginning.....

    should be :

    world class city (wanna be ) = world class prices (there already) = world class amenities (far from it)

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    Quote Originally Posted by DaytonaSS
    Bachelor pad ard 600sqft in prime location sounds like a good idea. Tons of successful 30++ single women/man ard. Feel there is a market for this group of individuals. 600sqft in D10 quiet corner + 2 seater convertable. Lifestyle man!
    If want to impress chicks a MM beats three room hdb hands down... Near town, after party short drive home, nice lift lobby, then go up and have some action.... Next morning, swim with bikini babe then breakfast in town then bs k home for more action.... tell me how to beat that?

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