Today

[cashrich]

Property expert says prices may collapse by up to 50 per cent in the next year or two

05:55 AM Sep 17, 2010
by Ephraim Seow Siew Lee

The dizzying rise in property prices here is not sustainable and the market may be heading for a hard landing in one to two years' time.
When that happens, property values may fall by as much as 50 per cent, according to an expert at a real estate forum yesterday.
Property experts speaking at the National University of Singapore's Institute of Real Estate Studies Forum said that excess liquidity in the market is the main factor that has been driving up property prices recently.

This liquidity may originate from prudent savings during the financial crisis, gains from the stock market run-up last year and foreign funds flowing here in search of better returns in Asian and emerging markets.
Mr Beat Lenherr, global chief strategist of LGT Capital Management, said: "I think that the money is finding a way around specific pointed measures and the money is just going to all the segments, micro-markets or micro-sectors."

Mr Lenherr also reckoned that the recent rally is not well supported and has been too fast, paving for a harder fall.
"If you look at the developments over the last four years, you clearly see elements of exaggerations where it doesn't make sense to buy in terms of rental yields or expected capital gains," Mr Lenherr added.
As such, he said property prices may "collapse by 30, 40 or 50 per cent" in the next one to two years.

Other speakers at the forum also said that the Singapore Government is still holding back on several other drastic measures such as the capital gains tax, which could dampen the property market abruptly if introduced.
They said the Government has so far been successful in building good neighbourhoods and community in its housing policies beyond controlling prices.

"I think the local market has been kept quite steady. I think the Government can indeed take pride in being able to making available affordable housing to more than 70 or 85 per cent of the masses," said Professor Bernard Yeung, Dean of NUS Business School. Ephraim Seow

URL http://www.todayonline.com/Hotnews/E...xt-year-or-two

Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved

Get your cash ready

[novel]

haha...really? I can start saving now

[isaaclim]

Anyone attending Mr Lenherr's talk on Thursday?

[Regulators]

50% quite unlikely. imagine buying a condo for $800k and later dropping to $400k (cheaper than current 4rm HDB), how is it possible? If a 4rm HDB bought at $400k drops to $200k levels which is cheaper than current prices of a 3rm flat, how is that also possible? I think those figures were simply plucked out of thin air

[hyenergix]

There is a reserve price for the land the government sells. Because land is such a precious resource in Singapore now, the government is selling them at higher prices and limited them to 99 LH. Coupled with guaranteed increase in population due to immigrations, this forms a hard to break price floor for the properties. Unless interest rates increase to > 3%.

[sleek]

Anyway the keyword he used is "may" and not "will".

[august]

angmor talk means credible? wat a joke lol

[sleek]

End of the day, he just wants us to give him our $$$ to manage la.

angmor talk means credible? wat a joke lol

[jwong71]

20-30% good enuff..

[cashrich]

50% quite unlikely. imagine buying a condo for $800k and later dropping to $400k (cheaper than current 4rm HDB), how is it possible? If a 4rm HDB bought at $400k drops to $200k levels which is cheaper than current prices of a 3rm flat, how is that also possible? I think those figures were simply plucked out of thin air

yes 50% is very very unlikely

10% - very likely - GDP 10% growth - unemployment low

20% - likely - GDP 5% growth - unemployment mid

30% - unlikely - GDP 0% growth - unemployment high

40% - very unlikely - GDP -5% growth - unemployment severe

50% - very very unlikely - GDP - 10% growth - unemployment hell

Condo may not be likely but 20 million sentosa cove projects maybe.. 10 million is still a huge sum.

[cashrich]

20-30% good enuff..

Start saving!

Wait for durian season!

It will come.

[proud owner]

50% quite unlikely. imagine buying a condo for $800k and later dropping to $400k (cheaper than current 4rm HDB), how is it possible? If a 4rm HDB bought at $400k drops to $200k levels which is cheaper than current prices of a 3rm flat, how is that also possible? I think those figures were simply plucked out of thin air

i remember my friends maisonette in AMK peaked at 680k, then fell to 400k
either during 94 or 97 crisis

so 30 is possible But not likely

[jwong71]

melville park peak 96-97 700k for 2beddder.

Last lows at 420k.

anythng is possible,just wait. if u do not need a roof

[Rysk]

Not likely it will drop 30 or even 20%.. due to good rental yield for the next 1-2yr.
Rental yield will support the property market price from falling too much even it happen.

[jwong71]

Not likely it will drop 30 or even 20%.. due to good rental yield for the next 1-2yr.
Rental yield will support the property market price from falling too much even it happen.

wad about the good rental yield in 2007. Finally in 2008 plunge..

gd rental yield cant stop it from coming down.
Tenants can just pay the penalty and go for cheaper rental..

[proud owner]

Not likely it will drop 30 or even 20%.. due to good rental yield for the next 1-2yr.
Rental yield will support the property market price from falling too much even it happen.

i still see alot of rental in D9/10 going cheap ...

why do u say rental is good ? for next 1-2 yr ?

can to share your insider info ? if any pls

[isaaclim]

End of the day, he just wants us to give him our $$$ to manage la.

I really tried hard. But I can't disagree with you!
Too bad the great strategy failed on me...

[cashrich]

i still see alot of rental in D9/10 going cheap ...

why do u say rental is good ? for next 1-2 yr ?

can to share your insider info ? if any pls

Obviosuly he is not an insider. I think he is still in dreamland. * Wake up * Wake up * Inception no more.

Rental rates has fallen and demand has dropped.

Corporate information that I cannot reveal the source.

[cashrich]

melville park peak 96-97 700k for 2beddder.

Last lows at 420k.

anythng is possible,just wait. if u do not need a roof

Factually yes.

Technically no.

Why?

5% drop, peanuts.

10% drop, people wait somemore

20% drop, people wait no more. Most would rush in. Rush Rush Rush Buy Buy Buy.

thus 25% to 30% very difficult to hit, unless we are in another recession. Then the 25% "support" might be breeched. If so, good luck to every property owners.

Do watch the macro and micro indicators.

[pmet]

I find the report to be quite accurate such as gains from stock market and foreign funds flowing into Asia which result in an inflated property market (Singapore's case). However, I don't agree that prices will be correcting by as much as 50%, which is not going to be the case even in extreme conditions.

Currently, the excess liquidity condition is still supporting property price so govt measures only make a dent. However, if that liquidity is taken away, coupled with increase interest rates which further restricts the amount of $$$ an individual can borrow, price will plunge. Forget the luxury segment, which won't do well in the mist of a low cash environment; it only benefits in a flush market; it goes beyond the limits in a flush market but retreats beyond the limits during a lull; you can associate it as the extreme ends of the market.

http://forums.condosingapore.com/sho...postcount=2435

With regards to my two-month old post above, it would be surprising if we don't see a 20% plunge in property price. Note that my post was before the govt measures but I already took that into consideration.

Price movement estimates:

-40% to -50% is impossible
-31% to -40% is likely
-21% to -30% is very likely
-11% to -20% is very likely
-0% to -10% is likely
1% to 10% is impossible

@Rysk - In SG context, property market is not supported by rental yield but the opposite is true. What jwong71 and proud_owner said are true. D10/D11 yield may be low but if price hold up, it will increase in the long term (12mths or longer due to the nature of such contracts). The opposite if price falls.

[mantrix]

I guess it depends on price and location. If one bought 1400psf in OCR potential for dropping is much higher than if you were to buy it at, say 500psf.

So 30- 50% drop is not across the board but for those who paid unrealistic prices...

[calvenng]

The likely scenario is price remain stable for a while before rising again. Despite govt warning n cooling measures since Sep 2009 the buyers keep on flocking in. Do you think all are stupid.
Almost all the buyers can afford to service their loans if any for the next 10 years. So even if prices drop by 50% they are not scare and can hold. Most are buying with their eyes open The surplus cash "given" by the govt thru job credits are better put into property, stocks, bonds etc than keeping them in saving deposits.
How will price drop when there are Very very few sellers willing to lower their price much from current level? .Developers too will only lower their price as a last resort when they need cash urgently. Most of them have no problem obtaining cheap loans n public cash thru bonds issue that they can keep or postpone selling their vacant units till someone buy at the price they want.
So don't think there will be any significant corrections unless mortgage /housing loan rates move up drastically.

[cashrich]

I find the report to be quite accurate such as gains from stock market and foreign funds flowing into Asia which result in an inflated property market (Singapore's case). However, I don't agree that prices will be correcting by as much as 50%, which is not going to be the case even in extreme conditions.

Currently, the excess liquidity condition is still supporting property price so govt measures only make a dent. However, if that liquidity is taken away, coupled with increase interest rates which further restricts the amount of $$$ an individual can borrow, price will plunge. Forget the luxury segment, which won't do well in the mist of a low cash environment; it only benefits in a flush market; it goes beyond the limits in a flush market but retreats beyond the limits during a lull; you can associate it as the extreme ends of the market.

http://forums.condosingapore.com/sho...postcount=2435

With regards to my two-month old post above, it would be surprising if we don't see a 20% plunge in property price. Note that my post was before the govt measures but I already took that into consideration.

Price movement estimates:

-40% to -50% is impossible
-31% to -40% is likely
-21% to -30% is very likely
-11% to -20% is very likely
-0% to -10% is likely
1% to 10% is impossible

@Rysk - In SG context, property market is not supported by rental yield but the opposite is true. What jwong71 and proud_owner said are true. D10/D11 yield may be low but if price hold up, it will increase in the long term (12mths or longer due to the nature of such contracts). The opposite if price falls.

So you are the smarter ones to offload earlier. Anyway wise and good. PMET is a professional.

[cashrich]

The likely scenario is price remain stable for a while before rising again. Despite govt warning n cooling measures since Sep 2009 the buyers keep on flocking in. Do you think all are stupid. Almost all the buyers can afford to service their loans if any for the next 10 years. So even if prices drop by 50% they can hold. They are buying with their eyes open. They have so much surplus cash that it is better to put in property, stocks than keeping them in saving deposits.
How will price drop when there are Very very few sellers willing to lower their price much from current level? .Developers too will only lower their price as a last resort when they need cash urgently. Most of them have no problem obtaining cheap loans n public cash thru bonds issue that they can keep or postpone selling their vacant units till someone buy at the price they want.
So don't think there will be any significant corrections unless mortgage /housing loan rates move up drastically.

Correct, that is coming soon (my prediction) 3 - 6 mths.

Now IR built already, another IR is on the way. I.e. increase in I/R (Interest Rates) will start to hurt those who are not cash rich.

[DC33_2008]

Wow! That Capital Management guy may have a hidden agenda? What will happen to stocks if property down 30-50%?

Correct, that is coming soon (my prediction) 3 - 6 mths.

Now IR built already, another IR is on the way. I.e. increase in I/R (Interest Rates) will start to hurt those who are not cash rich.

[azeoprop]

Actually there are alot of cash rich people around still waiting. If price drop by 5-10% many of them will chiong to buy liaoz, bringing up the price again, just like what happened last year.

Last year, recession, everybody waiting for low price which never came because many cash rich people spoil market, price drop a little only all chiong and buy.

[proud owner]

The likely scenario is price remain stable for a while before rising again. Despite govt warning n cooling measures since Sep 2009 the buyers keep on flocking in. Do you think all are stupid.
Almost all the buyers can afford to service their loans if any for the next 10 years. So even if prices drop by 50% they are not scare and can hold. Most are buying with their eyes open The surplus cash "given" by the govt thru job credits are better put into property, stocks, bonds etc than keeping them in saving deposits.
How will price drop when there are Very very few sellers willing to lower their price much from current level? .Developers too will only lower their price as a last resort when they need cash urgently. Most of them have no problem obtaining cheap loans n public cash thru bonds issue that they can keep or postpone selling their vacant units till someone buy at the price they want.
So don't think there will be any significant corrections unless mortgage /housing loan rates move up drastically.

Just a thought on the highted portion

it has been going on for past 4 yrs or more ..

that LIQUIDITY is good , bank saving rates sucks ..buy properties give better return

this has been true ..

BUT .. when this feeds into the lowest level of population .. we can assume 70 pct of sporean have bought properties ..

on the part of the banks , imagine 70 pct taking home loans, say 50pct financing, AND at the same time, withdrawing FD, or savings ..

there will come a point where their loan portfolios grow so much, they dont have enuff savings deposits to 'match fund' the loans ..

what happens then ?

1. raise savings rates, to attract deposits
2. raise mortgage rates, to slow down book sizing blowing up further
3. issue bond? maybe

these point to HIGHER rates ..

some will argue that foreign funds are still pouring in .. funds have a certain returns that they 'promised' their investors ..once they achieved that return, they will move out and move on to something /somewhere else ..

to me .. 4-5 yrs is about time for foreign funds to take profit, liquidate and move on to somewhere else thats still at low entry level ..

NOTE :
I AM NOT SAYING PROPERTY PRICES WILL CRASH..
JUST PERSONAL VIEW THAT, ITS BEEN STRETCHED , AND I FEEL THAT ITS ABOUT TIME, BANKS WILL START TO REVIEW THEIR PORTFOLIO .. AND LIQUIDITY SITUATION .. AFTERALL SUBPRIME IS NOT THAT LONG AGO ..

[vip]

Rather than ‘fast rally’ or ‘rental yield’, I think macro economy and market sentiment play a bigger part here. Only a serious crisis or a prolonged recession can erode the confidence of buyers.

(I have highlighted how these factors influenced the previous property cycles from peak to bottom at http://propertysoul.com/2010/09/17/p...-1-to-2-years/)

Unlike stocks, property prices do not collapse overnight. And it takes at least two years to reach the bottom.

Also, estimating the duration of a slow market makes more sense than predicting the percentage of the fall.

The property market plunged 44.8% from peak end of 1998 but it climbs back shortly in 2000 Q2.

The market started falling 2nd half of 2000. Despite a 20% drop, you don't see the boom until 2007/2008.

[devilplate]

Golden era for asia! Payback time for the ang mor! Its time for them to share one lobster!

[Geylang OKT]

Not likely it will drop 30 or even 20%.. due to good rental yield for the next 1-2yr.
Rental yield will support the property market price from falling too much even it happen.

Where are you from? Timbuctoo or Greenland or Iceland?