Last night the stock market had its worst day since the 1987 stock market crash. S&P 500 and Dow Jones plunged almost 10 percent.
1. How will the slump of stock prices affect the property market?
2. Will there be many good buys in the Singapore property market soon?
3. How will different property sectors react to the Covid-19 crisis?
4. What to take note of when buying undervalued properties or fire sales now?
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Property prices more tied to real economy than financial economy/markets.
Real economy = jobs & companies as going concerns.
Catalyst this time round is the virus, hence need to see how soon & how strong countries around the world (esp Singapore’s main trading partners) can get a grip on it.
Base case is a mild (or almost) recession with a U-shaped recovery. In this case property prices will weaken, but not crash. Doesn’t mean you’ll make money though — location & potential for redevelopment still number 1 (and that’s assuming Singapore remains a premier global city for the next 10-20 yrs).
Many mass market condos have very little redevelopment potential, unless we have 10 million population & govt allows big ramp up of plot ratios.
Monitor the citizen & resident unemployment rate, as well as the rate of acceleration in unemployment.
If major recession is on the cards like in 2001 or 2008, the unemployment rate tends to ramp up fast. E.g. overshoot the upper bollinger band if you chart it.
Agree with all your points.
How Covid-19 impacts the global economy, both intensity and duration is difficult to determine. Even our leadership is unsure let alone trying to hazard a guess that it is base-case of a mild recession. Buyers who bought at the peak just before the Asian Financial Crises, bore the pain for more than 10 years before their properties saw some daylight. Singapore is especially vulnerable when the virus situation is now a pandemic. If the severity of financial markets persist, it will affect the economy, thus the employment. It will take six to twelve months before property prices are impacted. The key is the employment rate. When a property investor loses his job, couples with no tenant for his investment, soon he will place his property onto the market. The cascading effect will cause prices to fall. Some of our cooling measures may cushion the impact but Spore cannot be insulated completely esp a viral pandemic.
You are right. The government can only do that much to stimulate the economy. But they can’t save everyone’s job and all the business enterprises. The property industry also depends very much on the market sentiment too. Once it is gone, it is difficult to have buying interest in the market.
If the audiences are looking for a market crash, then you will have to look out on real employment data both locals and foreigners.
When a recession hits, the first to go will be foreigners, because developments and demands will slow down and no reason and need for foreign talents. Hence then, those property owners who are using income from rental to finance or help on the monthly installment. Then this will dig into their salary/ investment / savings. Then when further retrenchment occurs and affect Singaporean, then you will most likely see fire sales or defaults on payment. This cycle will usually take about 6 to 9 months from the day when retrenchment occurs nation wide on foreign talents.
As for the present moment of Covid 19, lets wait and see especially in the Month of May for reopening, if not open, we will have to observe June and lastly 2nd quarter’s employment, manufacturing and housing data of the world primarily United States.
Yes, you are right. Besides the landlords who can’t use rental return to cover mortgages and expenses, those who bought uncompleted properties recently will soon find that it is more worthwhile to default and buy again when they see prices keep going down.