Investing in Singapore Property Market 2012

Comparative approach to ascertain if we are getting smarter in home choices

A blind man said to his friend: “I have not seen colours before; can you tell me how BLUE look like?”
His friend couldn’t answer the question as there was no basis to begin any description.
What is the MORAL of the story?
“You can’t describe COLOUR to someone who has not seen it before, and vice versa.”

And now, I am about to describe to you the TRUE COLOUR of the real estate market.


I have said on many occasions to a wide audience that we are witnessing the onset of a ‘downward trend’ in Singapore’s property market. In fact, at my last half-yearly ‘WHERE IS THE MARKET HEADING’  seminar held on 17 August 2011 (the next one coming in 3rd quarter of 2012), I concluded that foreign buyers had contributed to the surge in private home sale volume and private home prices, despite the host of calibrated measures that were aimed at the generic direction of property speculators. And probably to address the inadequacy of the earlier measures, the Additional Buyer’s Stamp Duty (ABSD) was imposed and it was to take effect from 8 December 2011 onwards. And that seems to have stamped the tide of foreign buying, at least for now.

In this issue of the Property Market Direction, while much expected emphasis will be placed on ascertaining the effects and effectiveness of ABSD, I will also show a series of sales figures gleaned from URA Realis system to support my earlier ‘downward trend’ statement which might have rattled some cages. But not to be rattled myself and to support my belief that the private home market may soon be reaching its ‘tipping point’ where some of the inherent RISKS will manifest themselves, I will offer the analysis on a number of leading indicators, including:

(1)     comparison of yearly private home sale figures (in transaction volume, transaction value and total floor areas sold) between 2011 and 2007* which is arguably the ‘benchmark year’ for measurement of property market peak; (References: Tables [2.1-A] to [2.2-C])

(2)  comparison of transaction volume and values of non-landed private property transactions in various market segments differentiated by price range, i.e. (i) LOW-END and MASS MARKET segment (characterised by home prices of “<$500,000 to $1 million”), (ii) MID-MARKET segment (characterised by home prices of “>$1 million to $2 million”, (iii) HIGH-END MARKET segment (characterised by home prices of “>$2 million to “$5 million”, and (iv) the LUXURY market Segment (characterised by home prices of “more than $5 million” by residential status (i.e. citizens, permanent residents, non-resident foreigners, and non-individuals) to ascertain the impact of the ABSD on foreigner’s market share; (References: Tables [2.3-A] to [2.5-D])

(3)     comparison of foreigner’s market share for the 15-month period from January 2011 to March 2012; (References: Tables [2.3-A] to [2.5-D])

(4)     comparison of transaction volume and value of landed homes to ascertain the strengths of unit land costs, and followed by an analysis of the affordability factor; (References: Tables [4.1-A] to [4.3-C]) and last but not least,

(5)     comparison of private home rents from the 3rd quarter of 2011 (Q3 2011) to the 1st quarter of 2012 (Q1 2012). There will also be a short discussion on whether at today’s capital appreciation, investors will get the rude awakening when they realise that the current private home rents amount are still lagging behind those achieved in the last bull-run year of 2007.

*2007 was a dramatic year by any yardstick as construction of the two Integrated Resorts (IR) (with casino inside) went underway. More foreigners and along with their massive funds rushed into Singapore, spiking the number of applications under the Financial Investor Scheme (FIS) (which is to be scrapped soon by MAS) and fuelling the rapid growth of the private banking and private wealth management businesses in Singapore before the financial tsunami in the US the following year brought everything back to earth.

Back then, foreign investment banks and property funds snapped up en bloc sale projects and large commercial buildings at the drop of the hat (e.g. Lehman Brothers bought Crosby House, Morgan Stanley and Wachovia Development; Goldman Sachs which bought DBS building, Hitachi Tower and Chevron House; and CLSA Capital Partners bought/sold SIA Building at Robinson Road – just to name a few high profile deals). On the residential front, fund managers searched frantically for luxury and high-end private residential properties – called the ‘uber’ apartments, both for rent and for purchase. And by the way, the record prices set in the luxury home segment in 2007 have yet to be breached until today, with all the cheap money flowing into Singapore following two rounds of Quantitative Easing (QE) measures in the US.