Singapore Property Going Down The Tubes?

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cannuck35
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Singapore Property Going Down The Tubes?

Post by cannuck35 » Sat, 29 Mar 2008 8:54 pm

I sent my buddy an e-mail asking if it was a good time to buy property in Singapore...

He's a Hong Kong based Asia property analyst for a small successful private investment bank.
He sent me this....(don't shoot me, I'm just the messenger.)
Well...I would wait at least another 6 months to a year.

We told clients and investors to sell all Singapore holdings (property, stocks and everything else) in June 2007. We determined that prices would never, ever be higher and were predicting a 15% drop in pricing by March 2008 and 25% drop by June 2008.

Rationale was simple and not rocket science.

#1. There was no demand for housing when the boom started.
The vacancy rates on existing housing were above New York, London, Hong Kong, Tokyo and other major urban market levels. A Singapore property boom made no sense at all.

#2. Singapore GDP...nice impressive numbers. But the growth was 99% construction related. There is no economic growth when the construction boom ends and those numbers are subtracted from the total.

#3. The existing luxury housing vacancy levels in Singapore were adequate to fill the needs of Singaporeans and any possible influx of new senior executives for the next 5 years. Thus, there was no demand for executive luxury housing in the market.

#4. Value for money on Singapore property for foreign investors is not good when compared to other projected growth economies. (several factors are weighed including psf, quality of workmanship, size of economy, projected growth of economy, lifestyle and culture of the market.)

#4. The targeted future population numbers of Singapore are pie in the sky and completely without substance. Singaporeans are not having kids and the demand for jobs in Singapore will be service led lower paying jobs to supply the planned tourism developments. Non of these new inhabitants will be buying or renting condo's, especially in the high-end. And tourists visit, they don't buy or rent.

#5. Singapore is not a supply/demand driven economy. It is a small, managed economy. Thus, the property development plans were lofty, risky, and not based on future real supply/demand realities.

#6. There is a lack of real, transparent, objective information available in the Singapore market about the Singapore market. This leads to investors belief in hype and speculation rather than economic principles.

#7. Global money supplies and markets are taking a beating and will continue to take a beating. The second call on the sub prime products happens this June so more big losses are expected. This will stall or even damage the Singapore economy.

We expect distress sales in the property market to start soon. The high-end rental market is non-existent and the higher % of all unit sales were high-end investment property, speculator driven.
These buyers need "wealthy" renters to subsidize the million dollar mortgages. Most locals cannot afford the rents the market is demanding.
Surveys of multinational companies and banks have indicated that there is no boat-load of expats with a big housing allowance arriving at the Singapore port anytime soon. The new owner is now stuck with 100% of a very expensive monthly mortgage.

Here is an example of one major high-end development I'm following to prove the point. These are some very telling numbers.
600+ units launched
20+ remaining at $2,000 per square foot via the developer.
100+ units previously sold are now for sale privately less than 7 months after launch for $1,300 to $1,600 per square foot.
The reason...no rental income.
That tells me that property owners are willing to admit that market prices are down 25%+ already. Unfortunately, even at a 25% discount, there are no buyers.

Existing Singapore residents are keeping the rental market buoyant due to the fact they sold their old places and are waiting for the prices to drop...OR...waiting for their new unit to be completed. These people are relatively small in overall numbers and definitely not going to rent high end luxury units. They are driving HDB, middle priced housing rents up right now. They are also demanding 12 month leases or even less if they can get it proving that they are waiting to move or sitting on the sidelines waiting for prices to drop.

The Singapore property market is massively oversupplied today and more units are on the way. This is not good. This is should be extremely troublesome to anyone who owns property anywhere in that market. The potential valuation losses in the property market could be enormous, especially at the high-end. Overall prices could sink well below SARS levels and this could happen within 6 months to a year.

The short lived property boom was very much like a pyramid scheme.
It was all hype and no substance.
The first guys in are now smoking big cigars.
The last guys in are now left holding the ashtray.

Singapore Property Search

 

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Post by Forks » Sun, 30 Mar 2008 12:47 pm

far more articulated than me but what i have suspected ever since the bubble started, after seeing what happened to japan with its bubble, Singapore could be in for some major shocks.

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Post by keepitreal » Wed, 02 Apr 2008 8:46 am

Big shocks as you mention. Rentals are already down from what I can see and the sale market is definitely heading south as well. Just need to wait for those mortgage payments to start piling up and hurting folk.

I for one have had enough and am moving out of Singapore. I know many others in the same boat.

I was speaking to a taxi driver last night and he asked me how much I was paying for my condo. I told him 3k and he thought uit was extortionate. Little did he know that it's actually 5k...lovely place Singapore is but it needs to come down to earth.

Also, I heard that the Singapore Flyer is booked up for 3 months solid. So I went down there on Saturday and bought a ticket (no queue) and got straight on, very nice but no one is using it. Once the casino's are up and running, will it be the same? Afterall, residents (except EP's) have to pay $100 to get in, so who the hell is going to go there when Maccau is the place to go gambling in Asia?

The government here have this vision that people will choose Singapore as a holiday destination, why though? What is actually here, there are no beaches or other top atractions like other other cities. That casino complex at Marina Bay is massive so I think they'll be waiting for it to pay itself back for some time to come....

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Post by sierra2469alpha » Wed, 02 Apr 2008 8:55 am

Outstanding post Cannuck - many thanks for sharing!

Looks like we're helping out some poor sod with his "...million dollar mortgage..." !!! Lucky Bugger! Wish we could convert our allowance into OUR mortgage payment :( :(

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Post by Asian_Geekette » Wed, 02 Apr 2008 10:37 am

Interesting posting there cannuck35. I wonder how the landlords would react once the rental market stabilizes. :lol:
My business is not to remake myself, but make the absolute best out of what God made. -Robert Browning

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good post

Post by Guowei58 » Wed, 02 Apr 2008 10:58 am

that's a good and comprehensive view of the Singapore RE market. my apartment building is not even half full after opening for more than three months!

the main problem i think is that the market is not deep. Price movements are therefore sharp in either direction. It's susceptible to speculation.

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Post by cannuck35 » Wed, 02 Apr 2008 6:53 pm

my apartment building is not even half full after opening for more than three months!
My development is 50% empty after being 100% full for 10 years.
Neighbors I had for years bailed after getting ridiculous rent increase notices. The "bubble" succeeded in moving expats out of district 9,10,11 and scattered them around the island. Nobody is filling the abandoned units.

My neighborhood has become a very attractive, vacant slum... :lol: The good news is that the pool is now kiddy scream free most weekends.
Outstanding post Cannuck - many thanks for sharing!
I will pass the acknowledgment on to the author. I simply cut and pasted.
I left out some of his "big brother land; bank; media; driven" conspiracy theories about the Singapore property boom even though they all made perfect sense.

ANOTHER TIDBIT FROM MY BUDDY. "Does anyone in Singapore realize that there has never been a market where the launch of a casino INCREASED property prices. They historically drive property values down considerably until accepted both culturally and socially within the community. That takes years to accomplish."

I was debating on buying at $2,300 psf in Singapore vs. 100,000 baht psm in Bangkok. My buddy's email straightened me out in a hurry.

Sukhomvit...here I come.
I'll take my chances on a country that may fall back under military dictatorship rather than invest here. :D

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Post by HunBunny80 » Wed, 02 Apr 2008 10:57 pm

Very interesting email there.

I was actually predicting a dip by end of the year. I know my landlord has been trying to sell the flat we are renting (really annoying!) but no one has viewed it and it has been a year since. Last Saturday, his agent texted us to see if we would be interested to buy it. No chance.


Meanwhile, I am also looking elsewhere for rental. The market is certainly not as buoyant as it was last year which is a great relief.


Fingers cross!

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Post by kaseyma » Sat, 05 Apr 2008 7:16 pm

cannuck35 wrote:ANOTHER TIDBIT FROM MY BUDDY. "Does anyone in Singapore realize that there has never been a market where the launch of a casino INCREASED property prices. They historically drive property values down considerably until accepted both culturally and socially within the community. That takes years to accomplish."
If you're referring to casinos in western countries, the stigma associated with casinos may not be relevant in SG.
The reverse may actually happen (i.e. prices initially rise and then decline with time).

cannuck35 wrote:I was debating on buying at $2,300 psf in Singapore vs. 100,000 baht psm in Bangkok. My buddy's email straightened me out in a hurry.

Sukhomvit...here I come.
I'll take my chances on a country that may fall back under military dictatorship rather than invest here. :D
Thailand is interesting, but I thought you needed to be a Thai citizen to buy property there.
Have some places been opened up to foreigners?
Would these happen to be at the far reaches of Sukhumvit (i.e. far from city centre)?

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Post by cannuck35 » Mon, 07 Apr 2008 9:24 am

Have some places been opened up to foreigners?
Yes.
I am buying right next to the Emporium Shopping Mall.
Brand new development.
All the new developments around Asoke are open to foreigners.
There are several agents in Singapore that have been appointed and you can even have your mortgage done through a Singapore bank as well.

I'd name the representative company here but I don't want to be perceived as blatantly advertising on behalf of a property agent. :o

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Post by ksl » Mon, 07 Apr 2008 11:45 am

cannuck35 wrote:
Have some places been opened up to foreigners?
Yes.
I am buying right next to the Emporium Shopping Mall.
Brand new development.
All the new developments around Asoke are open to foreigners.
There are several agents in Singapore that have been appointed and you can even have your mortgage done through a Singapore bank as well.

I'd name the representative company here but I don't want to be perceived as blatantly advertising on behalf of a property agent. :o
What are the prices like in Thailand, the complex you are on about? I belive my mate from UK, purchased one just before Christmas, although I'm out of touch with him just now. Never mind ! 100.000 BHT Thanks

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Post by frenzal » Mon, 07 Apr 2008 12:59 pm

for me it'd be great if the rental market went down by 2009, when I'm moving to Singapore. At the moment, prices are horrid. I can only really afford to rent out a shared apartment as studios and 1BRs don't really exist :s

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Post by kaseyma » Thu, 10 Apr 2008 5:55 am

cannuck35 wrote:
Have some places been opened up to foreigners?
Yes.
I am buying right next to the Emporium Shopping Mall.
Brand new development.
All the new developments around Asoke are open to foreigners.
There goes the neighbourhood. :o

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Post by tooktheredpill » Mon, 14 Apr 2008 10:52 pm

thx 4 sharing! =)
was reading everywhere that it was a manufactured boom and thats another backer. Maybe with more buildings going up it will bring the $$s back down to earth.
Can anyone suggest another Asian country that a foreigner can buy property in? Heard Malaysia was opening this up but only to retirees.

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Post by timo_in_singapore » Mon, 14 Apr 2008 10:58 pm

Whilst I generally agree, it's probably worth throwing in a few caveats.

1) Doesn't the Govt publish online (via SLA? URL not to hand) all the land/condo transactions for each quarter? I seem to remember that all rental transactions between private landlords and tenants are published on the same site.

2) Don't expect the Landlord to be a panicked seller and thus agree to lower rent because of what is happening in the global markets. Culturally, it is unacceptable to be seen lose face, and while uneconomic many landlords will accept the condo will be empty for a number of months rather than agree to a lower than expected rent. If they bought the place from spec in 2005 at 500psf and it's now trading at 1500psf, it still has some way to go before it is out of the money.

Most people I hear forecasting a imminent collapse of the SG property market are usually in the firing line for an upcoming rent hike so are naturally biased (of course.. this works both ways). If you are getting priced out of a lux condo, just accept it and rent an HDB .. unfortunately, the market is always capable of staying irrational for a lot longer than you can remain liquid!

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