Singapore property market? Some not so good indicators.

Not many would believe that the Singaporean economy may not doing well in the next few years. Personally, I also do not believe this will happen. However, the threat is there. According to Dr. Chua Hak Bin, the head of emerging Asia economics at Bank of America Merrill Lynch, there is a possibility of Singapore entering into a period of stagnation over the next few years. He was speaking in Real Estate Developers’ Association of Singapore (Redas) property market seminar. He said that due to this stagnation, the property market is unlikely to stage a sudden rebound even if some of the cooling measures were relaxed now.
Some recent numbers do correspond to that possibility. Employment growth contracted for the first time since the 2008 global financial crisis (GFC), loans growth contracted as well and Singapore’s inflation plunged to the lowest in five years. Wait a minute. Isn’t inflation a bad thing? Since it is lowest, why is it not good? Actually inflation would normally rise in tandem with economic growth. The only catch is that it should be managed so that it rises slower than economic growth. However, if all indicators are down and so did inflation, this is definitely not a good sign for the economy.
According to Redas president Augustine Tan, “The build-up of the oversupply situation in the private residential market will not abate in the short term and recovery will not be a quick one.” In Singapore, the prices for private homes continue to decline for the seventh straight quarter. The number of new private residential units including executive condominiums are expected to be over 89,000 new units between 2015 to 2019. Other signs include a lower GDP growth, thus causing the economy to be less supportive of the property market. Population growth has slowed with foreigners finding it harder to obtain employment but birth rates in Singapore is way too low to support population growth. labour productivity growth has also been negative in the last four years and private investment has contracted over the past two years. Let’s hope everything would normalise in terms of demand and prices to remain low enough for new demand to increase organically. As for the cooling measures, I think the developers may have their wishes. With prices having fallen so many quarters, it may be worth letting go some of the controls. Happy hoping.
written on 20 July 2015
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