Tan Kin Lian's Blog: Property bubble in Singapore

Sunday, October 04, 2009

Property bubble in Singapore

The bubble in the property market during the past six months is due to the following factors:
a) perception that the economy will get better
b) low interest rate
c) marketing tactic of property consultants
d) lack of information for customers

These activities help to create a false market, leading to a speculative bubble. It is not sustainable.

Some of the risks that will lead to the busting of the bubble are:
a) second dip in global economy (quite likely)
b) higher interest rate (a certainty)
c) control over marketing practices (not likely)
d) government measures (already in place)

Consumers can get better informed by searching this portal or by investing $25 in a property report (and save much more by avoiding a costing mistake).

10 comments:

Anonymous said...: I think the most important factor driving the current property price run is immigration. Based on the most recent numbers released, Singapore's population now stands at 4.99 million. The increase in the past 2 years has been incredible !

The suddent surge in population has depleted the current housing stock which resulted in the rise in price. The price rise has been worsened by the speculative factors listed in this posting.

Moving forward, it is unlikely that the recent measures will lead to a significant cooling of the market. On average, it takes about 1.5 years for a new project to be built and reach TOP. Hence even if there is land release and a significant increase in building by HDB, it will not be until 2011 before the supply comes online.

On reducing the rate of immigration, this is a policy option with a large number of negative consequences. The reason for the significant increase in immigration was to prevent a drop in aggregate demand as a result of the recession. If we cut back sharply on immigration now, we run the danger of putting Singapore back into recession. This is especially if the much anticipated double dip recession actually materialises in the US and other developed economies. The safe policy option would be to continue with the existing immigration policy for another 1 year or so until it is very clear the global economy has recovered.

The most likely scenario for the next 6 months to 1 year would therefore be a continued rise in property prices. Beyond this time frame, it is uncertain what will happen. If the current immigration policy continues, the current high prices can be sustained. Speculators who sell their homes now in anticipation of buying back at a much cheaper price later are therefore playing a very dangerous game.; October 04, 2009 10:13 AM
Tan Kin Lian said...: Singapore cannot continue to attract immigrants as there are insufficient jobs to go around. Many locals are unemployed. The immigrants also need jobs - if they cannot find jobs, they cannot survive in Singapore.; October 04, 2009 11:00 AM
Anonymous said...: They attract not just the Tom, Dick or Harry immigrants. They also attract a lot of rich to super rich immigrants who bought condos and landed properties. There will be no limit on this category as they can be sourced from the whole wide world, from the West to the East.

The target is 6.5 million, now 4.99 million so there is still way to go. Maybe another 2 or 3 years to do it.

After all political stability (98% seats for PAP) and peace are assured for a long time. MM Lee knows Singapore well enough to decide that 6.5 million is not an issue.; October 04, 2009 11:33 AM
Anonymous said...: The unemployment statistics published using the quarterly Labour Force survey seem to suggest that there has been quite robust job creation. This is likely due to the fact that the large inflow of immigrants have led to wage levels being depressed. As such, it has become more attractive for busines to operate in Singapore. When the full year GDP results are released in 1Q2010, it is likely that we will see quite high GDP growth.

The rosy economic numbers (relatively low unemployment, high GDP growth) of course mask the true underlying economic picture. Most Singaporeans will see their incomes stagnate or fall. Depending on whether you are a property owner, you could be better or worse off as property prices hold firm or continue to rise.

If you look at things from a political angle, this will of course be sold during the upcoming elections that the current government has helped save Singapore from the worst economic crisis since the Great Depression.; October 04, 2009 11:45 AM
Anonymous said...: How different is the RED portal from URA website that provide transaction prices?; October 04, 2009 11:46 AM
Tan Kin Lian said...: I tried using the URA website to get transaction data before. It was quite difficult (at least from my personal experience).

I have designed the RED portal to be easier to use. I hope that visitors will find it easier to get all relevant information about a condo or housing project from the RED portal.

I also developed the concept of BMP (benchmark pric), AMX (amenity index) and comparables (i.e. similar projects in the same postal sector).; October 04, 2009 11:52 AM
Anonymous said...: Only those who sold high in 2007 and waiting to buy low this year are complaining :); October 06, 2009 7:05 AM
Anonymous said...: Unless you have money to hide from dodgy business in China and Indonesia, as a foreigner you'll compare buying in Singapore vs buying at pretty much the same prices in London, NY, Paris, etc., as prices have reached pretty much the same level. Given that these other places offer better paying jobs, arts, and much more to do in general, it's unlikely this 'foreign demand' will continue. Investors are not stupid. I feel there's no doubt the price bubble is created by greedy locals helped by low interest rates. Clearly the govna's fault. My hope if for the bubble to burst and them go eat chicken rice for the next foreseeable future. Finally reasonable people will have a chance to buy property at a reasonable price.; June 07, 2010 10:58 PM
Anonymous said...: No property bubble in Singapore yet-Lee Kuan Yew

SINGAPORE June 25 (Reuters) - There is no "bubble" yet in Singapore's residential market and the government is taking steps to ensure the sector does not overheat, the city-state's senior statesman Lee Kuan Yew said on Friday.

"There is real underlying demand," in the residential market, said Lee, Singapore's first prime minister who now holds the title of minister mentor in the cabinet of his elder son Lee Hsien Loong.; July 14, 2010 10:39 AM
Vaishri said...: Hello Mr Tan - the property prices in Singapore are very concerning for people like us who are looking for a place of our own. The idea of being in huge debt for the rest of my life is particularly concerning. How long do you think it would take for the property market to dip and what could drive that? It seems to be very sentiment driven. Thanks; April 14, 2011 11:30 PM