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Thread: Market may correct in 2015/6: forum

  1. #1
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    Default Market may correct in 2015/6: forum

    http://www.businesstimes.com.sg/prem...forum-20131113

    [SINGAPORE] The property market here could correct significantly in 2015 or 2016, when higher interest rates are expected to coincide with a large increase in housing supply, economists said yesterday.

    Making presentations at the 20th Singapore Economic Roundtable, they indentified this as one of several medium-term challenges and risks confronting the Singapore economy, the others being over-leveraging in certain household segments, lower cost-competitiveness and obstacles to productivity growth.


    The forum, jointly organised by the Institute of Policy Studies and The Business Times, is held twice a year under the Chatham House Rule - under which participants agree to keep each other's views anonymous to promote frank debate.

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    Agree that this is a likely scenario. However this has already been considered and taken into account with all the cooling measures and tdsr implemented. Question will be the magnitude of correction that is permissible. Should the magnitude be large, the appropriate absd will be removed to recalibrate the market. Unless the market drops rapidly due to external factors.

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    [SINGAPORE] The property market here could correct significantly in 2015 or 2016, when higher interest rates are expected to coincide with a large increase in housing supply, economists said yesterday.

    Making presentations at the 20th Singapore Economic Roundtable, they indentified this as
    one of several medium-term challenges and risks confronting the Singapore economy, the others being over-leveraging in certain household segments, lower cost-competitiveness and obstacles to productivity growth.

    The forum, jointly organised by the Institute of Policy Studies and The Business Times, is held twice a year under the Chatham House Rule - under which participants agree to keep each other's views anonymous to promote frank debate.

    The event attracted more than 30 academics, private-sector economists and policymakers.

    Citi economist Kit Wei Zheng said that property prices are likely to fall 10 to 15 per cent over the cycle in the next few years, which could materially reduce households' net worth.

    The discussant for his presentation, Barclays economist Joey Chew, said she expected an even larger correction - 20 to 30 per cent in 2015 and 2016, which is when the US Federal Reserve is expected to raise its interest rate after tapering off quantitative easing.

    But Mr Kit said that the housing supply in the pipeline should not be under-estimated, noting that the potential private housing supply till 2017 has risen to 32 per cent of the existing stock of private residential units. This will push vacancy rates up, especially since population growth is slowing.

    Ms Chew estimated that vacancy rates could surge to more than 10 per cent in 2015 and 2016 amid curbs on foreign demand, given that the secondary market has weakened following the government's multiple rounds of macro-prudential measures to cool the property market.

    On the demand side, overall home ownership levels have risen to 90 per cent from the 10-year low of 87 per cent at the end of 2010. This suggests that pent-up demand for housing to live in has already been met, Mr Kit added.

    Both economists noted that the risks of rapidly rising household debt in Singapore are ameliorated by the fact that households are not just asset-rich but also cash-rich, but Mr Kit noted that property has accounted for almost 80 per cent of the growth in household net worth since 2006. "It follows that a fall in property prices in the next few years would also erode household net worth significantly," said Mr Kit.

    Also, the distribution of debts and assets may be important: Recent figures from the Monetary Authority of Singapore (MAS) and the Credit Bureau show that rising debt burdens among those in their 30s to 50s and debt levels rising past the peak income age of 50 may signal that individuals are borrowing on their assets. If such loans are being used for investment properties, that could amplify the downward pressure on prices, said Mr Kit.

    One participant pointed out that MAS has said that it is prepared to unwind some of the measures introduced when the property market cools, although others, such as the total debt servicing ratio, are longer-term ones to ensure prudent lending.

    But others said that reversing such demand measures, while necessary, may be insufficient. One participant said: "Once a condo is built, the supply is there. It's not clear to me that investor demand will come back; immigration policies are being tightened.

    Another said: "I'm not sure how much the government can do to support the market. It's already reached a bubble situation. I'm not sure how much can be unwound."
    "Never argue with an idiot, or he will drag you down to his level and beat you with experience."

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    Thanks ringo for the full article!
    You must have a great interest in business to subscribe to the business times !

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    Thanks Ringo for the full report.
    Downside risk is certainly getting bigger. Like someone mentioned, how much can be unwound... and fast enough? The question is... is there a bubble and how much air is allowed to escape before it's enough. Only the government who has all the figures dynamically know the answer.

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    my concern is more of wat if mkt did not correct significantly in 2015/2016 ... wat's the probability of tis happening?

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    well, there are experts who think the issue of oversupply is overblown too (reported in the week before last papers). coupled with the fact that US rates are likely to remain low for a decade (and EU slashed their rates by 25points just a few days ago), it is very likely that the low-interest rate scenario will be here to stay.

    ever since 2011, experts had been and is still predicting the market to correct in the subsequent years. but till now, history has proven them wrong

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    Quote Originally Posted by eng81157 View Post
    well, there are experts who think the issue of oversupply is overblown too (reported in the week before last papers). coupled with the fact that US rates are likely to remain low for a decade (and EU slashed their rates by 25points just a few days ago), it is very likely that the low-interest rate scenario will be here to stay.

    ever since 2011, experts had been and is still predicting the market to correct in the subsequent years. but till now, history has proven them wrong
    Yes I agree. This is just a way that the gov is micro managing expectation. Overly bullish attitude is not healthy for the economy. That's why bear columnists is never out of job, they are needed to voice concerns from time to time. While it is the gov job to get a balance economy, it is not my job. My job is to make money.

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    I don't think there will be a bubble bursting unless, if for some reason, foreigners stop coming top Singapore.
    Hence we need to continue our population growth.

    If interest rate goes up, most prudent home owners should be able to weather it, esp with the present tdsr.

    The ones that will be most affected will be the ones who are highly leveraged with multiple properties.

    As for rental, as long as foreigners keep coming in, the demand for rental will be there.
    As the supply of private housing is increasing, as long as more foreigners are coming in, there will always be a demand for rental.
    So even if supply is more than demand, there may not be a significant decrease in rental.

    Hence there will not be any bubble bursting, if any, it will just be a small drop in prices and demand for rental.

    Therefore, the location of the property is of prime concern.
    When buying investment property, think very carefully of who your potential tenants will be, what the surroundings has to offer,before making the purchase.
    Last edited by princess_morbucks; 13-11-13 at 09:33.

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    i think the prices will not go anywhere. Everyone seems to be numb with numbers now.

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    The Title and Thread is certainly Deja Vu for many.

    Since late 2010, this has been predicted repeatedly not just in this forum but in many other platforms/websites online. Now in Late 2013, many of the asking prices for resale properties are still at all time high. For the smaller units, still very difficult to negotiate prices right now from all time high. No doubt vol has dropped and there were some losses as highlighted in the CCR losses thread but these are still far and few compared to the total no of transactions.

    Have blindly followed the advice/opinions of analysts quoted on mass media over the years but so far most have been wrong. missed opportunities waiting for market to correct and bec another MTB in the casualty list.

    Think many experts in this forum are better.

    Any correction will be cushioned by all the CMs bec now only strong players play the game. Just look at the reported no of multiple unit players in the DUO condo right now, the no of players in high profile Echelon and the >550 cheques for Alex R. Go visit all these showflats and u can get frightened by the crowd.

    Still huge amount of liquidity floating around.

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    Quote Originally Posted by ekl2ekl2 View Post
    The Title and Thread is certainly Deja Vu for many.

    Since late 2010, this has been predicted repeatedly not just in this forum but in many other platforms/websites online. Now in Late 2013, many of the asking prices for resale properties are still at all time high. For the smaller units, still very difficult to negotiate prices right now from all time high. No doubt vol has dropped and there were some losses as highlighted in the CCR losses thread but these are still far and few compared to the total no of transactions.

    Have blindly followed the advice/opinions of analysts quoted on mass media over the years but so far most have been wrong. missed opportunities waiting for market to correct and bec another MTB in the casualty list.

    Think many experts in this forum are better.

    Any correction will be cushioned by all the CMs bec now only strong players play the game. Just look at the reported no of multiple unit players in the DUO condo right now, the no of players in high profile Echelon and the >550 cheques for Alex R. Go visit all these showflats and u can get frightened by the crowd.

    Still huge amount of liquidity floating around.
    Yes, we don't owe patriotic duty to the country to keep the price low and let other fellow countrymen or foreigners to buy affordable property. If one day we have to live underground, that is gov job to think of the solution. In the mean time, if one is really serious about affordable housing let us have more subsidised housing or cheap gov land sale. Until such solution is found, then one cannot be blamed for having to look after for one self.

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    I doubt it will happen. Current housing prices are here to stay, or move up.

    If the 6.9 mil population by 2030 is anything to consider by, from now until 2015/16, another 300,000 more residents or so will be living in singapore then, compared to now. and That is a lot of people.
    I've had enough. I'm done!!!

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    Hmm....looks like a forumer called Mr.Basic is quite right.
    He has been warning when the market was at the high end of property optimism.
    Waiting for all this bearish news out now from the analyst is already to late.
    That is why from another thread there are people losing money.

    http://forums.condosingapore.com/sho...13068&page=147

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    not sure about moving down, but surely cant move up too much anymore with Khaw watching it like a hawk.

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    Quote Originally Posted by princess_morbucks View Post

    As the supply of private housing is increasing, as long as more foreigners are coming in, there will always be a demand for rental.
    So even if supply is more than demand, there may not be a significant decrease in rental.
    Not too long ago, some reports said foreigners find the rental here too expensive. If rental drops a bit, Gov may view this a healthy thing which helps to bring in more foreigners....I guess.

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    Quote Originally Posted by clemdale24 View Post
    I doubt it will happen. Current housing prices are here to stay, or move up.

    If the 6.9 mil population by 2030 is anything to consider by, from now until 2015/16, another 300,000 more residents or so will be living in singapore then, compared to now. and That is a lot of people.
    Still, foreigners have to find this place attractive enough...

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    http://www.propertyguru.com.sg/prope...g-speculatiThe number of foreigners buying property in Singapore fell to 330 or seven percent of overall private property transactions in Q3 this year, following tough cooling measures introduced by the government, revealed National Development Minister Khaw Boon Wan in Parliament on Tuesday and reported in the media.

    He noted that this is a significant decline from the 17 percent of total transactions accounted for by this group in 2011. In December that year, the government imposed a 10 percent additional buyer’s stamp duty (ABSD) on all property purchases by foreigners. *

    Responding to a query from MP Christopher de Souza (Holland-Bukit Timah GRC), Mr Khaw also stated that sub-sale transactions, considered a gauge of the level of property speculation in the market, dipped to 4.6 percent in Q3 2013 from 7.6 percent in 2011.
    In absolute numbers, sub-sale transactions dropped from 670 per quarter in 2011 to 181 in Q3 2013. With this “encouraging” trend,Mr Khaw said that the government will continue to closely monitor the market and will not hesitate to act further when necessary.


    http://www.propertyguru.com.sg/prope...ying-speculati


    Looks like the cooling measures will continue and even more may be introduced.
    Prices will surely continue to be down.

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    Hahaha I also remember a few years ago, some Propnex guy also say property prices will correct by 20% in that same year due to the introduction of one of the CMs... Lol.

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    From Duo thread, i notice AMK starts to buy, this makes me even more bullish on the market in 2015.

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    we are in a strange world. interest rate is really going to be low for a long long time.

    in 1996 I believe gov made a mistake in dealing with pty bubble: it did not choke off the demand side early enough. end up lots of ppl suffered when bubble burst because of the leverage.

    today gov learned: very early it imposed loan restriction. at 60% or even 50% LTV, this and that loan restriction, at this level whoever still buys will have much less financial obligation. this reduces chances of panic selling in the event of adverse economic climate.

    I give MAS credit for doing this early. This helps everyone.

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    Quote Originally Posted by smellyfish View Post
    not sure about moving down, but surely cant move up too much anymore with Khaw watching it like a hawk.

    actually, just look at govt land auction prices - has URA ever accepted a bid that is below it's minimum threshold or market value? it's an emphatic NO!!

    if land prices don't come down, how much do we think, then, will new launch prices drop by? developers can cut a little, for now, by squeezing on their own margins or use cheaper materials. how far and how long can this go?

    hence, as long as the govt artificially props up land prices, we can be sure of the inadvertent outcome.

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    Quote Originally Posted by amk View Post
    we are in a strange world. interest rate is really going to be low for a long long time.
    wat makes u feel confident take int rate will continue to remain low for a long time?

    even if say Fed keep int rates low for the next 10 yrs, MAS can (if they wan) hike spore int rates to deter ppl for borrowing.

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    Quote Originally Posted by mermaid View Post
    wat makes u feel confident take int rate will continue to remain low for a long time?
    The answer is YELLEN.


    Quote Originally Posted by mermaid View Post
    even if say Fed keep int rates low for the next 10 yrs, MAS can (if they wan) hike spore int rates to deter ppl for borrowing.
    If MAS increase interest rate, the Singapore dollar will increase accordingly.
    This will impact on exports and may impact our growth.

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    Quote Originally Posted by mermaid View Post
    wat makes u feel confident take int rate will continue to remain low for a long time?

    even if say Fed keep int rates low for the next 10 yrs, MAS can (if they wan) hike spore int rates to deter ppl for borrowing.
    If that happens 1 usd = 1 sgd

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    Quote Originally Posted by mermaid View Post
    wat makes u feel confident take int rate will continue to remain low for a long time?

    even if say Fed keep int rates low for the next 10 yrs, MAS can (if they wan) hike spore int rates to deter ppl for borrowing.
    the bank spread can creep up gradually but only to a certain limit
    artificially manipulating interest rates has its consequences; e.g.
    • govt bond rates must go up
    • attract 'hot' money into the banking system
    • banks need to deploy the monies to generate higher returns - venture into riskier investments or decisions
    • artificially bringing up inflation rate
    • risk of deflation if consumers think savings generate a better risk-yield profile than investment vehicles e.g. property

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    Most of the time, developers overbid. Like Yishun. 50% more than 2nd bidder.


    Quote Originally Posted by eng81157 View Post
    actually, just look at govt land auction prices - has URA ever accepted a bid that is below it's minimum threshold or market value? it's an emphatic NO!!

    if land prices don't come down, how much do we think, then, will new launch prices drop by? developers can cut a little, for now, by squeezing on their own margins or use cheaper materials. how far and how long can this go?

    hence, as long as the govt artificially props up land prices, we can be sure of the inadvertent outcome.

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    Quote Originally Posted by thomastansb View Post
    Most of the time, developers overbid. Like Yishun. 50% more than 2nd bidder.
    and i have to go back to UOL's bid for the land parcel at katong. kenna rejected because it was below (an undisclosed)the minimum.

    govt isn't helping by sending such signals. as for overbidding, there may be other factors at play e.g. F&N wanting to 'monopolize' the region or protect prices, need to stock up land, etc

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    If the govt sell our land at a low cost, will the developer sell low too? I think not. The bottomline is max profit with min layout.

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    Ooooo ... I sense many are bulls!!

    I'll throw in 1 speculative statement to support the bulls.

    Marc Faber recently stated that QE could be permanent, and it is not a matter of when the taper will start, but rather when US will announce they are going to inflate the QE amount from 80B per month to 200B or even 1T per month! I wouldn't be surprised if it actually happens.

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