After a good long break, SPK is back in action!
As we step into year 2018, the best topic to discuss for the first post of the new year will probably be the property market outlook for the new year! Will the year of the dog be a good or bad year for the residential properties in Singapore?
SPK gazes into his crystal ball and share the following thoughts:
- Property buying sentiments to remain strong, driven by the encouraging economic growth, better labour market outlook and pent-up buying demand
- The feel-good factor and wealth effect from 2017 stock market bull run will further prop up buying sentiments
- Majority of the 2017 enbloc sites will only enter the supply in 2019. Supply in the primary new launch market remains low in comparison to the boom years of the early 2010s
- Due to the lack of supply in the primary new launch market, demand may spill over into the resale market that provides better value
- Enbloc/Collective Sales may slow down temporarily, especially for the bigger sites. Many developers have acquired new sites in 2017 and they may slow down the acquisition momentum in the short term to digest the acquisitions and prepare for new launches
- Look out for big developers that had not acquired anything in 2017, like CapitaLand. They may fill the gap when other developers take a breather
- Smaller sites for boutique developments may emerge as the next enbloc craze. Small-time opportunistic developers and investors may want to join the game next
- Expect developers to hike prices by 5% to 10% as indicated by the forward pricing based on recent collective sale transaction prices
- Impact of rising interest rates on sentiments might be muted as long as job market remains good and people still have a job to pay their mortgages
BUT, there are some things that the crystal ball can’t tell SPK. We need to be cautious of these ‘Black Swans’:
- Tightening measures from the government – For now, SPK does not see an immediate threat of tightening measures. The government has been taking a reactive stance towards the recent developments in the property market. The 1H 2018 government land sales programme was a good example. But do not dismiss the possibility of tightening when market heats up
- More stringent loan approval criteria from banks – SPK thinks that this could be a game killer when the interest rates spike sharply. For now, banks use 3.5% as benchmark rate to access TDSR and if interest rates rise, banks may use higher benchmark rate to mitigate their risk and the amount of loan that buyers can get will be reduced
SPK will give a thumbs up to the property market for this year!
Only time will tell if SPK’s crystal ball is right or wrong. But what is more important is for property owners and investors to have a set of risk management plan in place and make sure that we are financially prepared to weather through a downturn and react accordingly. And always buy within your means!
Wish everyone a good property year ahead!