The title of a newspaper article caught my attention this morning,
“Property expert says prices may collapse by up to 50 per cent in the next year or two”
The reporter is quoting the comment from a ‘property expert’ at a real estate forum. The reasons given are “rally is not supported and has been too fast, paving for a harder fall”, “it doesn’t make sense to buy in terms of rental yields or expected capital gains”.
The conclusion is “property prices may collapse by 30, 40 or 50 per cent in the next one to two years”.
The reporter continues the article with “other speakers at the forum also said that the Singapore Government is still holding back on several other drastic measures … which could dampen the property market abruptly if introduced.”
See, a single comment from one speaker can be manipulated as an eye catching title, followed by selective sayings that support the same view. A negative picture was painted immediately.
On the other hand, an article published by Channel News Asia which covered the same forum has a totally different view. It’s title reads,
“Govt’s property cooling measures unlikely to significantly impact market”.
Anyway, rather than ‘fast rally’ or ‘rental yield’, I think macro economy and market sentiment play a bigger part to decide the boom or bust of the property market. You need a serious crisis or a prolonged recession to slowly erode the confidence of the buyers.
A review of the previous property cycles from peak to bottom shows the following:
year/quarter | private property price index
1)
1984 Q2 | 50
1986 Q2 | 33.5
33% drop influenced by:
– 84/85 economic recession
2)
1996 Q2 | 181.4
1998 Q4 | 100
44.8% drop influenced by:
– 1996 May anti-speculation measures (Seller Stamp Duty, property gain tax)
– 1997 Jul Asian financial crisis
3)
2000 Q2 | 140.4
2004 Q4 | 113.8
18.9% drop influenced by:
– 2000 Mar dot.com bubble burst
– 2001 Mar US recession
– 2001 Sep 9/11
– 2003 Apr SARS
4)
2008 Q2 | 177.5
2009 Q2 | 133.3
25% drop influenced by:
– 2008 Oct US sub-prime crisis
5)
2010 Q2 | 184.1
201? Q? | ???
xx% drop influenced by:
– 2010 Aug Property cooling measures
– ?????
Unlike the stock market, the property market does not collapse overnight (unless there is a war). And it always lags behind the stock market for at least one to two quarters. Although the cycle is getting shorter and shorter these days, it still takes at least two years to reach the bottom.
Above all, I think the duration of a slow market is more important than the percentage of the fall.
Looking back, the property market plunged end of 1998 during the Asian financial crisis (44.8% drop from peak). But the market climbs to a new height shortly in 2000 Q2.
Everyone remember the gloomy property market starting 2nd half of 2000. Although the drop is less than 20%, it is not until 2007/2008 that those holding onto their properties can offload with a windfall which is long overdue.
What’s your take? Continued rise, unchanged, a sharp fall or a low plateau in one to two years’ time?
Most probably the price of property will maintain and rise at a slower pace if there is no recession..
My concern is the reantal market..what is the impact …to rise or to drop…
Most probably the price of property will maintain and rise at a slower pace if there is no recession..
My concern is the reantal market..what is the impact …to rise or to drop…
Agree with you that recession has the most impact on property prices.
Rental is all about supply and demand. The Singapore rental market is affected by sudden influx (or departure) of foreigners.
Besides an exceptionally good job market, I believe the high rental prices in 2007 is also caused by the rapid rise of property prices. Many owners left their units vacant for sale.
For condos, the trend is that smaller units (e.g. studios, 1-bedroom) are much easier to rent out than large apartments.
is it because of 1 room lower rental as compared to 2 room?
i think 1 room or studio has lower maintenance fee and therefore overall cheaper to maintain…
is the yield of 1 room is better?
Agree with you that recession has the most impact on property prices.
Rental is all about supply and demand. The Singapore rental market is affected by sudden influx (or departure) of foreigners.
Besides an exceptionally good job market, I believe the high rental prices in 2007 is also caused by the rapid rise of property prices. Many owners left their units vacant for sale.
For condos, the trend is that smaller units (e.g. studios, 1-bedroom) are much easier to rent out than large apartments.
is it because of 1 room lower rental as compared to 2 room?
i think 1 room or studio has lower maintenance fee and therefore overall cheaper to maintain…
is the yield of 1 room is better?
Smaller units are “easier to rent out”, thus lower vacancy rate and higher rental return.
1) More expats are coming here alone without their family.
2) Those who come with family and with a bigger housing budget can choose to rent a house instead of a condo unit.
3) Compared with renting it to a big family, your place in better condition after renting to singles or young couples. Thus less things to fix before handover to next tenant, minimizing loss of rental in between.
yes, how about 2 rooms type?
I understand studio and 1 bedroom is good for rental in city area and it is common to have studio in D1-8 areas…recently studio size unit also start to appear in suburban area…may i know what is your view in this area for rental for studio and 2 room type? thanks..
Smaller units are “easier to rent out”, thus lower vacancy rate and higher rental return.
1) More expats are coming here alone without their family.
2) Those who come with family and with a bigger housing budget can choose to rent a house instead of a condo unit.
3) Compared with renting it to a big family, your place in better condition after renting to singles or young couples. Thus less things to fix before handover to next tenant, minimizing loss of rental in between.
yes, how about 2 rooms type?
I understand studio and 1 bedroom is good for rental in city area and it is common to have studio in D1-8 areas…recently studio size unit also start to appear in suburban area…may i know what is your view in this area for rental for studio and 2 room type? thanks..
Whether it is studio, 1-bedroom or 2-bedroom, below is just my personal preference and from lessons learned in the past:
1) Choose the one with best layout and facing.
2) If maintenance fee the same for studio and 1-bedroom, buy 1-bedroom to maximize mthly return.
3) If less 2-bedroom than 1-bedroom units in the project, buy 2-bedroom to avoid competition during rent and sale.
Yes, more small size units are built in suburban areas. I expect these will be taken up by singles who want to stay near parents. Location is still key. Think about the tenant profile you expect from your properties.
Nonetheless, avoid shoebox units. Hard to get tenant and good rent, especially during bad times. Afterall, Singapore is very different from big cities like Tokyo.
thanks for sharing…
Whether it is studio, 1-bedroom or 2-bedroom, below is just my personal preference and from lessons learned in the past:
1) Choose the one with best layout and facing.
2) If maintenance fee the same for studio and 1-bedroom, buy 1-bedroom to maximize mthly return.
3) If less 2-bedroom than 1-bedroom units in the project, buy 2-bedroom to avoid competition during rent and sale.
Yes, more small size units are built in suburban areas. I expect these will be taken up by singles who want to stay near parents. Location is still key. Think about the tenant profile you expect from your properties.
Nonetheless, avoid shoebox units. Hard to get tenant and good rent, especially during bad times. Afterall, Singapore is very different from big cities like Tokyo.
thanks for sharing…
The pleasure is all mine.
The pleasure is all mine.
I read the article too. What stuck me was “it doesn’t make sense to buy in terms of rental yields or expected capital gains.” At current sky high prices, with yield abt 4%, does it still make sense for property as investment?
I think the prices will drop only when interest rate increases.
I read the article too. What stuck me was “it doesn’t make sense to buy in terms of rental yields or expected capital gains.” At current sky high prices, with yield abt 4%, does it still make sense for property as investment?
I think the prices will drop only when interest rate increases.