WHY DID SINGAPORE PROPERTY PRICES RISE MADLY
“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property expected to continue to rise despite govt measures, Karamjit Singh) We read Mr. Singh’s comments and we did a bit extra research. We agree with Mr. Singh’s comments. (Read the following for the detailed breakdown) Singapore’s inhabitants (in ‘000s) according to the Singapore department of statistics are: – Year Total Singapore Residents 2000 — 4,027.9 — 3273.4 2001 — 4,138. — 3,325.9 2002 — 4,176. — 3,382.9 2003 — 4,114.8 — 3,366.9 2004 — 4,166.7 — 3,413.3 2005 — 4,265.8 — 3,467.8 2006 — 4,401.4 — 3,525.9 2007 — 4,588.6 — 3,583.1 2008 — 4,839.4 — 3,642.7 2009 — 4,987.6 — 3,733.9 The population growth in 2006 over 2005 is a net surge of 135,600 The inhabitants increase in 2007 over 2006 is a net surge of 184,000 The inhabitants growth in 2008 over 2007 is a net growth of 250,800 The population growth in 2009 over 2008 is a net growth of 148,200 There is a nice table at http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html which shows the relative expansion rates of HDB. We are not against importing talent, but not even the USA have such a huge import quota. We are worried that the government has run out of ideas to grow the economy and is resorting to brute force economic growth. Based on household size of 3.5 people (Source: Singstat), this would translate into a potential Singapore private property housing demand of: – 2006 – 38,743 units 2007 – 52,571 units 2008 – 71,657 units 2009 – 42,342 units “In year 2006, we were building about 2,400 new flats. This year, we are building about 8,000-plus new flats. Supply has gone up to meet demand. That’s why HDB prices have gone up but they have not gone through the roof.” (Source: Straits times)
Is that demand enough? HDB talk like they have built a lot, but they have under-built by a large margin.
The norm for tenors of Home loan in Singapore is also becoming 25 years and 30 years. This means you will work till you die.
MASS Real estate market HDB BEING PROPPED UP
Numerous of these new supplies were “Built-to-order” flats which can require 3 to 4 yrs to finish adding to severe shortages of HDB apartments. Singapore resident’s need from Household formation (Marriages) come in at a range of 23,000 to 25,000. These new families surely need somewhere to stay in. Why couldn’t the HDB forecast the requirement? household formation is an issue which is very uncomplicated to estimate and awfully consistent over the years. Besides that, even though not all immigrants are awarded Permanent resident (PR) status, these individuals can generally end-up staying somewhere driving up rental income. Leasing rates are being pushed up. Mass market HDB property prices are being raised WHAT IS THE LIKELY EFFECT? Without the benefit of much option, Fussy Singaporeans will be forced to choose undesired locations such as Punggol which in the past has excess units. Not only that, some may not wait and instead go directly to buy private housing. HDB flat owners whose property valuation have gone up and are sitting on profits will now consider to sell their HDB and buy a private unit instead. There is currently no shortgage of supplies of Private properties at around 60k units over several years. This is easily 7 to 8 years of supply based on average consumption trend. The end outcome is that a greater proportion of people would certainly end up residing in Condominiums and private apartments. This will deplete supplies and bring smiles to property developers in Singapore. The Singapore government you’re underweight is going to be pleased that price ranges of land will increase and reach the land’s minimum reserve price to trigger a bidding process. Extra land sales equal more revenues for the government. And more builders bidding for land means higher prices. These higher prices are then translated into increased priced houses. Singaporeans have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the key price portion is the land price.
Did Singapore Mah Bow Tan micro manage the property prices?
Singapore has enhanced the art of micro-management. At $8000 household income, HDB income ceiling, you are unable to buy HDB flats. At $10,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium any longer. At a household income of $10,000 onwards, the Singapore government enthusiastically encourgage you to move upwards in consumption. Consumptions helps surge tax revenues (annual real estate tax, stamp duty, transaction fees for home agents which translate into taxes), and helps the economy in generating jobs. WHAT THIS Means With respect to THE SINGAPORE PROPERTY Prospective buyers AND THEIR home loans? If you are Singapore Property Buyers, you ought to be aware that there exists a slow-moving move in Singapore Government policy in play. The government is the largest land-owner, it can manage supply to control prices. Being an honest and efficient Singapore government bent on maximising land productiveness, you can expect land charges to proceed to rise and set new standards. These delicate or not so subtle policy plans will either enrich or impoverish you. And when you think about your Singapore housing loans, you ought also to take care to select the right framework to capitalize on these unwritten government guidelines or mis-calculations. We do not uphold or reject any government policies, we only spotlight such guidelines to the awareness of our readers so that they can find ways to benefit from these policies or benefits of government’s miscalculations.
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This post was written by guestauthor on June 27, 2010