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2014 Property Market Outlook

2014 Property Market Outlook with a cautious tone

The year that has gone by had packed in lots of surprises as far as property market prices were concerned. In fact, the year 2013 managed to beat the odds and all the predictions make by the property market analysts and gurus regarding the likely trend in the property price index. The URA Property Price Index or PPI managed an upward figure of 2.0% in the first three quarters of 2013 despite a host of adverse situations such as seven rounds of cooling measures, MAS’ Total Debt Servicing Ratio, and property tax hike. Thus, it would be quite interesting to speculate about the property market outlook that are likely to take in the next year. However, it would be dependent on a number of diverse factors.

Singapore Property Market Outlook

The trends emerging in the fourth quarter of 2013 has reveled telling signs regarding the likely weak figures that are going to prevail in 2014. The figures for the monthly property indices for the fourth quarter of 2013 may witness return of the negative price growth, which is likely to spill over in to the next year in spite of its small magnitude. The fall in the HDB Resale Price Index or RPI has been exceedingly steep at 0.9%, which is higher than the figure of 0.8% during the height of Global Financial Crisis in the first quarter of 2009. The prices of the HDB flats have doubled in their valuation since 2005, and this has enabled the owners of these flats to sell them at extremely high prices. The so-called ‘Wealth Effect’ has enabled these flat owners to upgrade to private condominiums with the proceeds of selling their flats.

Outlook for Singapore Property in 2014 remains uncertain

The fall in the prices has hurt the mass-market segment of the property market the most, and incidentally this happens to be the most voluminous and strongest part of the demand. Thus, as far as property market outlook is concerned, HDB flat owners are finding that prices of their flats have eroded significantly and they cannot receive good value for their property. This has sapped the life out of the property market. Moreover, the ‘Cash Over Valuations’ or COV for HDB resale flats continues to fall according to recent reports, and this seems to provide confirmation for the continuance of this trend into 4Q2013.

Property buyers remain cautious on Riverbank

The downward trend is property prices will not receive any boost because of government policy to slowdown the inflow of foreigners because of dissatisfaction among the locals. Thus, population growth rate will decline and increase competition of property prices and rentals because of coupling of this factor with record upcoming completions of projects.  The number of units completed per year wills more than double from fewer than 10,000 units yearly between 1996 and 2012 to 26,000 units in 2016. The initiative to scale back the Government Land Sales program in the first quarter of 2014 is an effort to check this huge upsurge in upcoming supply. However, this is also likely to create greater uncertainty in the property market, which will not be conducive for instilling confidence among the buyers.

The multiple rounds of Quantitative Easing or QE by the US Federal Reserve to fight the Global Financial Crisis has lead to an extended environment of low interest rates, which has been the root cause behind the buoyancy of property prices. However, any indication of even the most gently paced tapering of QE by the Fed is likely to result in an extremely market reaction. This reaction is likely to lead to erosion in the value and desirability of yield based assets including property. Moreover, the borrowing costs will most certainly rise even if the interest rates manage to hold firm. This is because the banks will charge higher for borrowing to hedge themselves against rising interest rates. Heavily leveraged buyers will be the ones to experience the direct effect of rising borrowing cost with attractiveness of property, as an asset will ebb, since it will provide lower net cash flow.

Riverbank Condo in Fernvale lane should be launching in 2014 by developer UOL. Prices of the condo remain affordable due to the fact that the land price was bid a year ago which was significantly lower than the prices today.

The property prices are extremely difficult and desperately tricky to forecast because of their dependence of a number of diverse factors. However, the most likely scenario for the prices is to either hobble at their present rate or fall by as much as 20%. Moreover, the most sagacious thing to do while purchasing property is not to base one’s decision on such predictions but analyze the present scenario. Proper analysis reveals the phase of the property price cycle that the present scenario belongs to, and provides cues from similar situations of the past. This, in all likelihood, is the best plan of action while purchasing property.

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