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Singapore’s housing boom may be declining


by seah chiang nee

As measures to discourage speculation and curb loans kick in, prices and sales fall.

ONE of the most common questions I encountered recently — quite a few from foreign friends — was: “Shall I buy property here?”

Few places on earth are more preoccupied with real estate than land-squeezed Singapore, except perhaps Hong Kong!

Here, it is a national craze which existed long before the recent influx of migrants added fuel to the housing demand.

For Singaporeans, a property is not just a home. It is also a commodity to buy or sell for a profit, to upgrade or move to another closer to premium schools for their children.

A survey once found that more than half the population here (52.2%) had changed homes at least once in the previous 10 years.

The large potential profits attracted numerous regional investors. The early birds from China, Malaysia, Indonesia and India have done well.

The market kept rising, almost in a straight line up, creating a bubble.

In the past four years alone, residential prices increased by 60%, one of the three fastest hikes in the world.

An Economist magazine survey last year showed that Singapore homes were the world’s third most expensive on a price-to-rent basis.

Some 57% were overvalued versus its long-term average — behind only Canada and Hong Kong.

However, the boom may be heading for a reversal.

Last week as I was writing this, a headline in the Castlewood Group website read: “Developers fight to overcome slowing market”.

Singapore developers were reportedly using “sweeteners” in order to tempt wary investors as the government’s series of cooling measures hit demand.

A bank Chief Executive Officer said he expects prices to fall by 10-15% this year.

This could be a better scenario. Others predicted a harder landing in the wake of a series of cooling measures to discourage speculation and curb loans.

As the curbs took effect, prices for luxury homes, the worst performer, fell by 2.1% last year as many rich foreigners stayed away.

Prime units were down 20% over 2012. Other signs of weakening included the following:

> In the last quarter of 2013, property investment sales crashed by 71.9% to S$3.9bil (RM10.1­mil) .

> The number of resale non-landed private properties plunged by 70.2% last month compared to a year ago.

> Private home prices fell by 0.9% in the fourth quarter, the first drop in nearly two years.

> Government Housing and Development Board resale flats fell by 1.3% in the fourth quarter, the worst drop in eight years.

Amidst worries about the housing bubble bursting, the buzz is turning negative.

A few of my Malaysian friends have asked me whether they should be selling their investments.

Some are worried by a Forbes magazine article forecasting a property bubble burst and even an economic meltdown in the next few years.

It could come faster if interest rates rise and when the large supply of new developments is marketed over the next five years.

Analysts believe much will depend on the economies of Singapore’s trading partners in the region.

“If China’s property and banking implode, they will drag Singapore down,” one commented.

Prime Minister Lee Hsien Loong recently likened his island state to a small upgraded sampan (boat), implying that it will sink or sail depending on the ocean waves.

The city’s long-term fundamentals for property remain relatively strong. It has limited land despite reclamation work, while demand will likely grow steadily in the future.

“As long as there is economic growth and regional political stability, the scarcity and demand will be around,” said a retail businessman.

The biggest obstacle to a recovery is the fear of losing quality jobs.

Buying a property involves a 30-year mortgage commitment that can run into trouble if either husband or wife gets the pink slip.

An increasing number of middle-class Singaporeans are losing confidence.

Observers believe that the People’s Action Party’s (PAP) political future will depend on its ability to satisfy the housing demands of the younger generation.

Many Singaporeans aspire to own a condo. Those who are unable to achieve this objective have migrated to Australia for the cheaper homes.

Secondly, Singapore is keen to attract young talented foreigners to come and make this their home.

The high cost of housing is also a major obstacle. They may attract the wealthier but less able foreigners instead of real talents.

For the government, which is facing an election in two years’ time, expensive homes are adding to their political weakness.

Today, the price of an average flat is between S$1mil-1.5mil (RM2.6mil-3.9mil), effectively pricing out many of the middle-class and younger workers while benefiting wealthier Singaporeans.

Expensive homes contribute to Singapore’s economic gap between the rich and poor by putting more money into the developers’ pockets.

“How on earth can a graduate start-up hope to afford one?” asked a businessman-friend.

The obvious answer is: “The majority can’t, even with today’s low-interest regime, without the help of parents.”

Worst of all, Singapore is dependent on its young men to defend the country. At 18, they have to be in the national service for two years before becoming part of the reservist army. In times of war, they become front-line soldiers.

The first generation leaders were conscious of the link between defence and home ownership.

A letter writer commented on the risk of plunging into property on loans.

“I really wonder how people can chase after properties when they are not sure of their employment status for the next five years.

“They will have to spend the next 30 years paying back their debts.”


Seah Chiang Nee is an international journalist of 40 years, many of them reporting on Asia. The views expressed are entirely his own.

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