Time to start withdrawing property curbs

[specuvestor]

it seems they will loose one set of votes if the prices continue to go up & lose another set if they go down. There is a another group which will be lost if the prices remain the same. So either way Big G is gonna lose votes. now they just have to decide which pool is the biggest one.

Agree. Populist policies never work in the long run. I believe when u do things right, people will eventually notice. Otherwise democracy is futile.

when cooling measures started to kick in bit by bit, the prices continued going up. Likewise when cooling measures start to be withdrawn one by one, IMO it still won't be so fast for prices to soften.

Would withdrawal of cooling measures actually send a message to buyers/sellers that the market is not doing well and going downwards? If yes, will that deter investors from the market and result in a negative feedback loop?

When market was going up, it was positive feedback loop. Property is a herd market. It is glaring that the loudest commentators are more concern about downside than upside.

[kichialo]

it seems they will loose one set of votes if the prices continue to go up & lose another set if they go down. There is a another group which will be lost if the prices remain the same. So either way Big G is gonna lose votes. now they just have to decide which pool is the biggest one.

The win situation is for prices to stay flat and neither go up or down. Because over time the group that supposedly loses out if prices remain the same will see their wages slowly catch up with prices.

[weijian]

Would withdrawal of cooling measures actually send a message to buyers/sellers that the market is not doing well and going downwards? If yes, will that deter investors from the market and result in a negative feedback loop?

When market was going up, it was positive feedback loop. Property is a herd market. It is glaring that the loudest commentators are more concern about downside than upside.

Where your money is, is where your heart (and possibly your mouth) will be.

[corydorus]

What ! Is too early to withdraw. I am surprise there is even discussion on it.
There is no way to keep the price flat in real market condition. The price has to go down like 15%-25% at least to really cool it else easily the market will hit another peak and destroy all previous measures.

[potatolover]

It is unlikely that government will allow a sharp correction to happen in Singapore... It is not in their interest

[CY09]

Let use district 22 prices as a gauge. Current median rental for the area ranges from $2850 to $4300. So I will use the monthly median rental for district 22 which is around $3.5k per month for a 1000 sq ft unit. This translates to $42k per year of rental income. "Singapore's residential property market has ranged from 2% to 5% looking at our own history" (from 8percentpa blog). So lets set a parameter of below 3% yield as overvalued and above 4% yield as undervalued. The price band will range from $1.050M to 1.4Mil for a 1000 sq ft unit. Next I will less 20% of the price due to property agent fee, refurbishment, interest expense and all other costs. Hence the new price band is at $820k to $1.12Mil. So a healthy range for non landed property is $820-$1,120/psf.

So where are prices now?

District 22 prices are transacting around $906 to $1203. So I will say prices are around fairly valued now and no curb should be done. Feel free to use other district's data.
*All median rental and transaction data are from squarefoot.com.sg
One Limitation of my data is that it is dependent on rental income remaining the same over the long run.

I also used today's ST report where the median rental of Jurong West HDB flats is reported to be $2.6k per month. Using the above methodology, a Jurong West flat should be worth 620-820k if it can be rented out for 2.6k per month (assuming the HDB flat still has a lease of 90 yrs or more)

[pianist]

It is unlikely that government will allow a sharp correction to happen in Singapore... It is not in their interest

my same tots, so many powerful and riches are vested with the land and properties including many men in white also, do u think they will let central district prices fall a lot?

just a quick sense in the central region where many riches stay, so many mrt stations and lines cut across there, amenities are there, workplace are there..

[opmi]

Let use district 22 prices as a gauge. Current median rental for the area ranges from $2850 to $4300. So I will use the monthly median rental for district 22 which is around $3.5k per month for a 1000 sq ft unit. This translates to $42k per year of rental income. "Singapore's residential property market has ranged from 2% to 5% looking at our own history" (from 8percentpa blog). So lets set a parameter of below 3% yield as overvalued and above 4% yield as undervalued. The price band will range from $1.050M to 1.4Mil for a 1000 sq ft unit. Next I will less 20% of the price due to property agent fee, refurbishment, interest expense and all other costs. Hence the new price band is at $820k to $1.12Mil. So a healthy range for non landed property is $820-$1,120/psf.

So where are prices now?

District 22 prices are transacting around $906 to $1203. So I will say prices are around fairly valued now and no curb should be done. Feel free to use other district's data.
*All median rental and transaction data are from squarefoot.com.sg
One Limitation of my data is that it is dependent on rental income remaining the same over the long run.

I also used today's ST report where the median rental of Jurong West HDB flats is reported to be $2.6k per month. Using the above methodology, a Jurong West flat should be worth 620-820k if it can be rented out for 2.6k per month (assuming the HDB flat still has a lease of 90 yrs or more)

If ALL people pays cash or 50% LTV, then the govt probably think it is fine. If it is 80% LTV with max out TDSR, it is not fine with govt.
Policy makers see from systemic risks.

[chialc88]

just do a sanity check...

pause for one minute...

what is the outstanding loan that you have vs market price?

or vs your purchasing price?

Don't need to tell me the answer...

because I can guess...




A Life not Reflected is a Life not Worth Living.

[AndrewHW]

Interesting developments in the property market. I have been waiting on the sidelines for more than a year now and can't be more confident that prices will go down.

- Market bottomed in 2008, and then have been raising rapidly since with increasing units under construction while the government added more and more property curbs as prices keep going up. Most of the time, there are only positive news even when prices began to rise above '07 historical high: influx of rich foreigners, low-interest rates, property is way to get rich, government population growth plan, the rise of Asia.

However, since latter part of 2013 I have been only hearing about negative property news: sales going down but prices still holding (when have stagnant prices been considered positive in recent years?). Then CCR prices going down, and certain property that were not completely sold or even launched. Recently we hear about property being sold but really mostly vacant. Now, people are talking about withdrawing property curbs.

It's not a sign of good news to come. So this is what I expect: prices will go down, property curbs will be removed but it doesn't help the market. Instead, it signals to people that the market has turned and more people waits at the sidelines while interest rates goes up reducing affordability. The region's government continues to clamp down of illegal money flow, especially China is another source of less wealth being transferred into property overseas.

The current property bubble has yet to burst but the same underlying factors seemed to be affecting Singapore, Hong Kong, and Vancouver.