S'pore home prices still falling

I am always for long term benefits of well-thought pragmatic macroprudential measures. But they forgot to mention one major diff: We cut foreign speculation with ABSD.

By Nisha Gopalan and Andy Mukherjee
(Bloomberg Gadfly) -- Ants don't attack two equidistant,
similarly tempting sugar lumps with the same fervor. One cube
gets devoured before interest in the other perks up. An
economist who has studied ants for years wonders if such herding
behavior could also explain the way investors treat comparable
assets.
Asia's property market offers a fertile ground for
entomological research. Property ants are piling into Hong Kong,
and ignoring Singapore. After moving up in tandem for years,
home prices in the two Asian cities began diverging earlier this
year. Despite broadly similar curbs aimed at tamping down
skyrocketing prices, Singapore continues to fall as Hong Kong
surges.
Why are cooling measures working in one city, but not the
other, especially when both have a 15 percent tax on foreign
buyers? The clampdown may even be slightly stricter in Hong
Kong, where the loan-to-value cap of 50 percent on homes priced
above HK$10 million ($1.3 million) is well below Singapore's 80
percent limit on a first mortgage of up to 30 years.
One answer to the puzzle: Singapore's curbs are all-
encompassing. Total debt servicing, including credit cards and
overdrafts, can't exceed 60 percent of a borrower's monthly
income. Add to that a glut of homes. Between 2014 and the end of
this year, UBS expects supply in Singapore to more than double
from the historical average to 51,000 units annually. In
contrast, Hong Kong is expected to produce an average of 19,800
units in 2015 and 2016, 35 percent more than the 2000-2014
average of 14,600, says Louisa Fok of UBS CIO Wealth Management.
That could partly explain the divergence: Singapore's home
vacancy rates are at their highest in 11 years and prices have
fallen 11 percent from their record in September 2013, while in
Hong Kong, the market unexpectedly resumed its rally in March.
Prices have almost quadrupled since the end of the 2003 SARS
outbreak.
Singapore home prices since September 2013
-11%
But ants' actions have consequences, especially with
extreme wealth inequality breeding popular angst. Affordability
is among the world's lowest in Hong Kong, which UBS says is at
risk of a bubble. The average skilled service worker needs to
work 18.5 years to be able to afford a 60-square-meter
apartment, compared with 11.8 years in Singapore.

--snip--

https://www.bloomberg.com/gadfly/article...-singapore

(07-10-2016, 10:40 AM)specuvestor Wrote: I am always for long term benefits of well-thought pragmatic macroprudential measures. But they forgot to mention one major diff: We cut foreign speculation with ABSD.

By Nisha Gopalan and Andy Mukherjee
(Bloomberg Gadfly) -- Ants don't attack two equidistant,
similarly tempting sugar lumps with the same fervor. One cube
gets devoured before interest in the other perks up. An
economist who has studied ants for years wonders if such herding
behavior could also explain the way investors treat comparable
assets.
Asia's property market offers a fertile ground for
entomological research. Property ants are piling into Hong Kong,
and ignoring Singapore. After moving up in tandem for years,
home prices in the two Asian cities began diverging earlier this
year. Despite broadly similar curbs aimed at tamping down
skyrocketing prices, Singapore continues to fall as Hong Kong
surges.
Why are cooling measures working in one city, but not the
other, especially when both have a 15 percent tax on foreign
buyers? The clampdown may even be slightly stricter in Hong
Kong, where the loan-to-value cap of 50 percent on homes priced
above HK$10 million ($1.3 million) is well below Singapore's 80
percent limit on a first mortgage of up to 30 years.
One answer to the puzzle: Singapore's curbs are all-
encompassing. Total debt servicing, including credit cards and
overdrafts, can't exceed 60 percent of a borrower's monthly
income. Add to that a glut of homes. Between 2014 and the end of
this year, UBS expects supply in Singapore to more than double
from the historical average to 51,000 units annually. In
contrast, Hong Kong is expected to produce an average of 19,800
units in 2015 and 2016, 35 percent more than the 2000-2014
average of 14,600, says Louisa Fok of UBS CIO Wealth Management.
That could partly explain the divergence: Singapore's home
vacancy rates are at their highest in 11 years and prices have
fallen 11 percent from their record in September 2013, while in
Hong Kong, the market unexpectedly resumed its rally in March.
Prices have almost quadrupled since the end of the 2003 SARS
outbreak.
Singapore home prices since September 2013
-11%
But ants' actions have consequences, especially with
extreme wealth inequality breeding popular angst. Affordability
is among the world's lowest in Hong Kong, which UBS says is at
risk of a bubble. The average skilled service worker needs to
work 18.5 years to be able to afford a 60-square-meter
apartment, compared with 11.8 years in Singapore.

--snip--

https://www.bloomberg.com/gadfly/article...-singapore

Do you mean Seller Stamp Duty(SSD)?

ABSD of 15% for foreigners is like buying a stock with 15% comm... Makes one think twice.
https://www.iras.gov.sg/IRASHome/Other-T...ty--ABSD-/

The SSD of course also curb short term speculative demand

yes, it helps to keep ALL speculators away!!

Singapore only wants long term investors to sink their funds in.

afterall, an expensive property market is not good for singapore who wants to attract growth through import population growth...
we are not Hong Kong,

The private residential market does not make sense right now.
The OCR ones 1.XM condos are fetching rentals not very much higher than HDBs.
But they cost several times more, it barely covers bank loan + maintenance + property tax.
As interest rates edge higher, prices will likely come down further.

Hi Big Toe,
Not sure if i posted it here.

One thing we have to take note is employment numbers. For a lot of people, because they have working income, they are able to sustain low rental yields while paying the loan. A private home is like their monthly investment plan. There are many especially the late 30s-50s age group who own private condos, rent out this condos, while they live in their first HDB flat.

So even if interest edge higher, I don't think prices will fall that much. ONLY when local employment rate falls, will we see a higher fall in housing prices.

The dynamic of the equation may have changed since gov intervene in the property market with cooling measures especially on mass market OCR.

One major constraint is the TDSR which means investor who buys after is much less dependent on rental income to support instalment. Is no longer easy to speculate. They have the financial muscle to pay down loan even if apartment stays empty throughout the loan period.

As CF mentioned, job is the key. I would even go further that due to TDSR has been around for some years, there is some level of saving which even provide an ever increasing buffer.

Cory

Speaking from an investment perspective, it no longer makes sense at current market conditions.
This is irregardless of the employment situation and their household financial situation.
While it maybe true that employment rate is very high now, that could only indicate things may stay the same or get worse.
Also in every property cycle, it usually gets much worse before it gets better.
Anyway this is my read on the situation. Don't have so much $ to invest in properties anyway

That's why gov has been focusing on supporting job market and job creation since gfc time, and housing price didn't drop much until those cooling measures came out. People should have saved quite some money from stable job market, hence I don't think gov will remove cooling measures soon unless there is high unemployment rate and also high interest rate causing fire sale of properties.

so can it be concluded that Singapore property prices are still comparatively affordable?

I'm quite surprised actually when I read through the affordability indexes and property price to income ratio tables of the world major cities, and found out that Singapore is actually not in top rankings. There are some other countries where people are struggling more to own a property