Please, let this be the LAST time we talk about 2012′s property scene. Last year, the property market was split into two parts: Crazy, and financially prudent. With the percentage of crazy being 100%. After the sixth cooling measure and $2 million flats, we imagine most property analysts just gave up. It was like trying to provide a sports commentary during a soccer riot. Even the numbers from Q4 2012 can be misleading:
Another day, another dollar. No, literally. That’s how much you’ll have left after servicing the home loan.
What Happened in Q4 2012?
Resale flat prices rose by 2.5%, and private homes by about 1.8% (from Q3). Overall, we saw a 2.8% increase for the whole year of 2012.
The highest growth (3.4%) came from the mass market properties. Also, note than more than 60% of Q4′s transactions were mass market units. High-end properties (mostly city centre) saw much smaller gains of 0.9%.
Here’s our take on what those numbers might mean:
- The market might be cooling
- Resale flats are still a problem
- Mass market properties are becoming a better investment
1. The Market Might be Cooling
And in the next episode of Urban Explorers, we hunt for the mythical Affordable House of Singapore.
In 2011, property prices increased by 5.9%. But in 2012, this stalled to 2.8%. So property prices are still rising, they’re rising a lot slower than they did before.
Let’s put it this way: If it was a fistfight between the government and property developers, then the government hasn’t won…but it has bloodied the developers’ noses.
On top of that, don’t forget the sixth cooling measure. It was only implemented in October 2012, so we haven’t seen its full effects yet: Once the new home loan restrictions settle in, a return to 2011′s price explosions is about as likely as an intelligent Youtube comment.
So why aren’t we flat out claiming “the market will cool”?
Because the global outlook is uncertain. If the Eurozone crisis deepens, or America goes like a lemming over the fiscal cliff, foreign investors might start flooding us with cash again. Strong capital inflows have overheated our property market before, and the ABSD is no deterrent to a foreign multimillionaire.
Keep a close eye on the news.
2. Resale Flats are Still a Problem
Singaporeans engaged in their national sport: Finding a flat.
Resale flat prices are like a glue-sniffing delinquent: Stubbornly high all the time.
The situation’s improved slightly since 2011. But despite news of 20,000+ new flats, we’re still facing a 2.5% increase. We need a better way to shift demand from the resale market (We’ve talked about this before).
A recap: The new supply of BTO flats doesn’t help certain home buyers. Single parent families, some Permanent Residents, bachelors, etc. can’t qualify for BTO flats. For these buyers, it’s irrelevant whether there are 20,000 or 40,000 new flats. They still have to fight over the tight supply of resale units, causing prices to stay high.
For those of you who can choose BTO flats, you might want to seriously consider it. Yes, I know two to three years is a long wait. But you’ll avoid the danger of buying at inflated prices.
3. Mass Market Properties are Becoming a Better Investment
Singaporean: Lives on an island surrounded by water. Pays $200,000 more for a swimming pool.
The URA (Urban Redevelopment Authority) has its master plan in full swing. Mass market properties in places like Jurong and Punggol can now look forward to great amenities: Malls, train stations, etc. And remember, mass market properties outpaced high-end properties in Q4 2012.
This isn’t their only attraction. Mass market properties also have lower quantums, which is a valued safety feature. Property investor Charlie Sng says:
“Right now our economy is contracting, so it’s best to be cautious. I would pick mass market properties over luxury condos right now. The loan quantums are lower, but rental yields and capital appreciation are still good.
As a landlord, I worry about the economic situation overseas. When large companies scale back, they will shrink expat packages. High priced luxury units will be harder to rent. I foresee this happening in the next few years, since Europe, America, and China are all in a mess.”
Would-be landlords, take note. Now is not the best time to gamble on an Orchard area shoebox.
A Bit of Extra Advice
I assume this is the mortgage banker’s office then.
Home loans are going to be difficult in 2013. Interest rates are already starting to climb, and they won’t remain cheap much longer.
Home buyers need to carefully compare loan packages, and secure the best rates while they still can. Forget the old tactic of “choose the cheapest, refinance in three years”. With new restrictions, borrowers need to take a long term view, and treat every loan package as if it’d be their last.
How did your property investment fare in 2012? Comment and let us know!
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