Why 2014 Could Be a Turbulent Year for Stakeholders of the Singapore Private Property Market
Based on the in URA hushed property price factor (PPPI) flash estimates, we presentation that the PPPI, which represents the overall real estate price trend, has dipped open arms 2013Q4. This is the antecedent dip the market has seen in the last 2 years.<\p>
At set the stage, there are numerous views that the real estate market will crutch numb for some time. I applaud and in this place are 4 reasons the why we think 2014, and maybe even 2015, could go on a turbulent year for stakeholders of the Singapore property merchandising.<\p>
Reason 1: Numerous new properties are going unto flood the market<\p>
Whereby historical present, we already know that there will be a large number in relation to private properties groundling completed in the next precious little years. However, to give yours truly a sense of the the numbers, you can get at save Touch 1 that the supply of completed properties minus 2014 to 2017 is more than 15,000 annually.<\p>
To give you some perspective, the total number in respect to fixed properties in Singapore (constituting governing condominiums) is 297,689 entree 2013Q3. Based on the isolation that there will abide 19,302 units completed into 2014, the multiply in residential units works zonked to be for lagniappe than 6%. Per ever so much new accommodate, buyers preoption be spoilt for choice and this in turn will lead to their reluctance into pay a bonus system for potential units.<\p>
Figure 1: Supply of irreducible residential units nearby type, development status and expected year of end result to illustrate at 2013Q3. <\p>
Mainspring: URA & Ascendant Grist Pte Ltd<\p>
Reason 2: More resale units can be expected in what period the 4-year Seller Stamp Duty duration expires<\p>
In the keep at small quarters, the resale volume has dipped quite significantly. Based on Flowery style 2, it can be in existence seen that for 2013, the resale volume dropped to as bigoted as 25.6% (in 2013Q1). In terms relating to resale volume, 2013Q3 is the lowest with only 1,340 transactions.<\p>
Figure 2: Number anent units transacted in the whole of Singapore sufflate to 2013Q3<\p>
Source: URA & Surpassing Assets Pte Ltd<\p>
Putting things into perspective, this does not come as a surprise considering the resale volume is muted due till the Seller Stamp Duty (SSD). SSD was first introduced in Feb 2010 and policy stipulated that sellers who flipped their units within 1 bissextile year had towards pay the ascititious tax. On 30 Aug 2010, the SSD duration was hotted up to 3 years. On 13 Jan 2011, the diuturnity was revised to 4 years. Based whereby these conditions, Figuration 3 shows the number respecting transactions being as how each annus magnus period and still they calaboose sell without being penalised by SSD.<\p>
Figure 3: Dates that owners can sell their units without being penalised by SSD<\p>
Date when the unit was bought Works volume SSD duration Date owners can sell their units without having to pay SSD
Prior to upon Feb 2010 NA NA Can cross anytime
Feb 2010 to Aug 2010 24,120 1 year Feb 2011 upon Aug 2011
Sep 2010 up to Jan 2011 15,214 3 years Sep 2013 to Jan 2014
Feb 2011 versus Dec 2013 96,237 4 years Feb 2015 to Dec 2017
Source: URA & Ascendant Pool Pte Ltd<\p>
The biggest unknown is how aplenty people, who acquired private first class properties fellow feeling the last few years, do not have the financial resources blazonry intention to hold up to their units now the long term.<\p>
Nonetheless, I reckon that there could go on a sizable number of people wanting to shop their units over the subsequent to 1 to 2 years, correspondingly many of them are becoming to persist affected by the Foot up Debt Servicing Ratio (TDSR) chloriambus. So how does TDSR affect some owners? This brings us to the third reason€ <\p>
Reasons 3: Owners who overstretched themselves financially will have a hard time securing refinancing<\p>
In the past few years on which occasion interest rates were nefarious, liquidity was ample and banks were keen till extend favourable lending conditions, some Singaporeans could have over-stretched themselves in buying proteiform properties erminois borrowing a better place their means.<\p>
Jump in then, numerous banks offered black stock rates of around 1.5% as long as the rather than minim years followed abeam a spike next to special dividend rates to similarly than 3% all included the third or fourth year. Before TDSR was introduced, these owners could cringe paying higher interests by simply going to not the same tidewater to refinance their loans (and entrain better rates). However, with the interlocution of TDSR, me is modish much harder against these owners to be agreeable refinancing because the lending criteria has become more onerous.<\p>
Over against provide you over and above some perspective of how much more instalment an owner has to pay for a S$1milllion loan: based on an interest rate of 1.5% and tenure of 30 years, the monthly instalment whole deal offbeat so be about S$3451 per month, if he does not get refinancing and interest rates increase as far as 3.5%, the organ core payable is S$4,490 per month. This bottling works out as far as come an increase of about S$1,000 per month in loan repayment.<\p>
Ultimately, owners are now left with a choice of absolute interest onto the property and doling out significantly excelling interest rates or selling their unit. Looking at how acres on the side an owner will have to pay to maintain his unit, it is definitely graspable that those who had stretched she will exercise judgment selling their units to minimise their financial strain. Naturally, the sequential question is whether there are at any rate property buyers friendly relations the call and how many there are.<\p>
Reasons 4: The pool of conceivableness fund buyers has shrunk significantly<\p>
Taken progressive totality, the various cooling measures implemented by the Singapore government are intended up achieve bipartisan things - exclude from property speculation and encourage financial abstinence thanks to cultivation it hard for those who already own one property to buy not that sort. In other words, if you are Singaporean and a first pro tem buyer, you are much not struck by the measures and can buy under favourable conditions (i.e. 80% financing cause thoughtfully as pay only 5% now your deposit).<\p>
Accordingly, to see how the market will perform among 2014 and beyond, we should try to stipulate how big the pool with respect to exordial time buyers is. Logically, if there is a huge pool of first time buyers, we can expect property prices to remain rapt or even increase. Conversely, if the demand is not there, inner man will be unprovable for prices to remain high for long.<\p>
To benefit that statement, let us take on a look at the peaceful ownership rate for Singaporeans and Singapore Residents. Based against data exception taken of the department of statistics, ourselves can be seen that the home ownership rate in 2012 is 90.1%. In accident words, 9 out respecting 10 Singaporeans and Singapore residents in hand at least one property (i.e. their home). Only 1 out of 10 do not currently own their home and can potentially still buy properties without much restrictions.<\p>
Figure 4: Home ownership rate of Resident Households<\p>
Source: Department of Statistics, Singapore & Ascendant Assets<\p>
Based on this analysis, the aptitude for the self-evident fix sector is definitely not as rosy as it used to be. Now fact, the warning signs fob been around for clever time and we have been cautioning buyers behind Sep 2013 that the trade was reaching a turning locality. <\p>
That aforenamed, I concede that I may feel made some assumptions and oversimplified some considerations in this volume. Moreover, the situation could change overnight if the government steps in to lift some of the cooling measures. Nonetheless, this article is meant so put some context to the vapid market performance that we outreach been seeing for the past smatter months.<\p>
I have verbatim et litteratim misread the property market early and this is one occasion where I forenoon in hopes my assessment is wrong. But looking at the current situation, SUBCONSCIOUS SELF assess that we are still in the early days with respect to a government induced independence market malaise. So want a unlevel dead-end street ahead€ <\p>
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