Property market trends for 2015
Time flies and the year is coming to an end. With 2015 upon us, it is timely for us to take stock to see how 2014 did, and at the same time, forecast how next year would be like.
In Jan 2014, we shared why we thought 2014 could be a turbulent for the property market (
https://sg.news.yahoo.com/blogs/prop...002122856.html). To recap, the bearish outlook for 2014 was due to the following reasons: (1) more residential units being completed and coming online, (2) more resale units entering into the market as units affected by the Seller Stamp Duty (SSD) clear the 4 years mark, (3) the pool of potential buyers has shrunk significantly. Looking back, the assessment from our research team has not been too far off. The index dropped from the peak of 216.3 in 2013Q3 to 207.9 in 2014Q3, which translates to a drop of about 4%.
What should you do in 2015?
So the question on everyone’s mind right now is what is going to happen to the real estate market in 2015? Is it a good time to enter or should you wait? And if you enter into the market, where and what should you buy?
Let us tackle the first question – what is going to happen to the real estate market in 2015? 2014 has been a lacklustre year and unless the government removes any lending measures, it is envisaged that 2015 will be no different.
Some investors are of the view that a market recovery could be on the way as the market downturn, which happened during the Global Financial Crisis in 2008, only lasted for 12 months. However, what they fail to realise is that the market conditions then were very different and the current malaise is done intentionally to rein in the inflated property market. Historically, market downtrends have lasted between 10 and 15 quarters. As we are only halfway through, investors and stakeholders must be mentally prepared for the quiet market to persist for at least another 6 to 12 months. For those who are interested to have the historical URA private property index since 1975, you can download the data here for free.
In view of the dull market outlook, property investors may want to sit out of the Singapore property market for the time being. Unless the deal is exceptionally attractive, investors who enter into the market right now must be mentally prepared to see the value of their assets drop in the coming months.
What about those who are looking for a place to stay and do not have the flexibility to wait? For homebuyers, here are some pointers you may want to look out for…
Have units in prime locations become more affordable?
Several weeks ago, some property developers cautioned that the cooling measures were adversely affecting the Singapore market and even forecasted an impending fire sale if the market malaise was to continue. Naturally, some homebuyers may be wondering if it is timely to venture into the prime districts and buy a unit directly from developers. To answer that question, let us first compare the median prices of properties in the different parts of Singapore.
Based on Figure 1, it can be seen that median PSF prices for non-landed residential units for Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR) are S$1,457, S$967 and S$923 respectively. While prices in CCR have dropped, as a whole, it is still much higher than RCR and OCR. This means that, although prices in prime areas have fallen, those who are thinking of getting a home there must be prepared to still pay a substantial amount.
New sale or resale residential units?
In view that there will be excessive supply coming onto the market, some buyers may be of the view the it could make more sense to get a unit directly from developers as they believe that they could be getting a better deal. However, when we compare the median PSF prices for completed and uncompleted units, they tell us a different story (see Figure 2 to Figure 4).
In terms of pricing, the new launch and resale median prices for CCR has the smallest difference of about S$71psf. However, the new and resale median prices for RCR and OCR have larger differences of about S$221psf and S$214psf.
From this simple analysis, we can tell that resale units for RCR and OCR are more value for money and those who are looking for deals should focus on those properties instead. For those who are looking to buy a unit in CCR, the difference between new and resale units is not too significant, hence it suggests that there could be a possibility for homebuyers to find deals directly from developers there.
Conclusion
In conclusion, as long as the cooling measures remain, I really do not expect any significant change to the property market in the coming months, or even for the whole of 2015.
That said, I concede that I may have oversimplified some considerations in this article and this assessment is based on current market conditions. The situation could change overnight if the government starts to lift some of the measures. Nonetheless, this article is meant to put some context to the lacklustre market performance that we have been seeing for the past few months. Similar to what I mentioned last year, I have definitely misread the property market before and this is one instance where I am hoping my assessment is wrong. But looking at the current situation, it is hard to see any silver lining so property owners should expect a bumpy road ahead.
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Originally Posted by lifeline
