Opinion is divided on the direction of Singapore’s property market, with some experts warning that unsustainable gains could result in a serious plunge. However, a recent gathering of industry experts concluded that the market is responding to wider economic influences, and efforts to cool off sizzling sales haven’t had much impact yet. See the following article from Property Wire for more on this.
Recent property cooling measures are not likely to have a significant impact on the overall property market in Singapore, it is claimed.
Property experts speaking at an industry seminar said global economic issues play a larger role, and that property prices will ride on positive economic growth.
The number of HDB resale transactions may have seen a sharp drop in the week immediately following the government’s cooling measures, but experts said that overall, the recently announced curbs will only have a marginal impact on the overall property market in Singapore.
They argued that external factors such as the state of the global economy play a more significant role.
‘Generally the property price is affected by external factors, or the growth of the Singapore property prices is because of the improved economy. People’s income increases, their wealth increases, that’s why they are buying,’ said Alfred Chia, chief executive officer of SingCapital.
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However, the measures are expected to reduce the cash premiums on HDB resale flats, commonly referred to as cash over valuation (COV), and they will put a damper on demand in the market for the rest of the year.
Market watchers expect COV amounts to decline by 10% this year from current levels, with a further 10% drop in 2011. At the same time sales in smaller properties are also seen picking up.
‘For people with housing loan and on a tighter budget, they will have to lower their budget to buy another property. That means if originally they were looking at a $1 million house, now they will have to look at something between $500,000 and $750,000, so you will see a shift in demand to smaller units,’ explained Chua Chor Hoon, head of research (Southeast Asia) at DTZ.
While the market adjusts to the new measures, the volume of mass market property sold is expected to fall by 10% from now until the year, according to some analysts’ estimates. No impact is expected in the high end property market.
Experts may be forecasting a decline in property purchase demand in the HDB and private property market in the coming months, but in the longer term, good economic growth will continue to support Singapore’s property market.
But others disagree. The recent rally is not well supported and has been too fast, according to Beat Lenherr, global chief strategist of LGT Capital Management.
‘If you look at the developments over the last four years, you clearly see elements of exaggerations where it doesn’t make sense to buy in terms of rental yields or expected capital gains,’ he explained, saying that property prices may ‘collapse by 30, 40 or 50% in the next one to two years.
Other speakers at the forum said that the Singapore Government is still holding back on several other drastic measures such as the capital gains tax, which could dampen the property market abruptly if introduced.
According to the latest report from CB Richard Ellis the number of property units sold in the third quarter has continued to fall from the previous quarter, due to the government cooling measures.
The real estate consultants predict that the residential market will continue to mellow in the fourth quarter of 2010.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.