Finding 1: Buyers still ‘sitting on the fence’, in expectation of further price declines (Chart 32)
As the survey showed, an overwhelming 95% of the respondents are expecting prices to decline further this year.
These sentiments can be attributed to the government’s cooling measurements (refer diagrams below).
The Total Debt Servicing Ratio (TDSR) affects the affordability of a borrower, ie less debt = more loan.
Another cause is the Loan to Value Ratio, which limits the gearing of a borrower, eg 2nd loan at 50% only.
Also contributing to anaemic demand are the impending rise in interest rates and the poor global economic outlook.
Finding 2: Singapore real estate buyers are highly price sensitive (Chart 19)
When searching for online information, a whopping 86.20% of the respondents want to see price comparisons, followed closely by details of the property and photos.
This reflects a sentiment that buyers place a big emphasis on prices when searching for properties.
So, developers and individual sellers will need to accept that selling above market rates is almost impossible now, with the tools available online.
Finding 3: ‘Magic’ Purchase Price (Chart 24)
Over 70% of respondents who purchased a property in recent times were investing $800,000 to $1,000,000.
So, properties priced to sell in that bracket will be resilient to drops and see relatively lesser impact from the market dynamics, and probably find it easier to secure buyers.
The developers have also seen this trend in recent years and have been calibrating their pricing strategies to meet this, by building smaller-sized units (studio apartments, 2-bedroom), so that the prices remain within the bracket.
Finding 4: Iskandar remains on Singapore investors’ radar, albeit cautiously (Chart 49-54)
The developments on the socio-economic front, together with the SG-RM exchange rate, make Iskandar hard to ignore.
With the chronic pain of getting caught in traffic jams set to be alleviated by the SG MRT-JB RTS system, Iskandar does have its captive base of buyers.
With better accessibility, some may choose to stay in JB and work in Singapore, or vice versa.
Over time, as more industrialists start their operations, and more education institutes attract more student, tenants’ base will grow, soaking up the large supply in Iskandar currently.
Having said that, investors considering investing in Iskandar should adopt a 10 to 15 years’ approach, before they start to see tangible returns on their ROI.
Finding 5: Singaporeans still interested to invest in Overseas Properties (Chart 41-42)
As Singaporean investors feel the effects of the government cooling measures, namely the Additional Buyers Stamp Duty (ABSD) and Loan To Value, on local property purchases, some have cast their sights overseas.
It is interesting to note (in Chart 41) that almost half (49.30%) of those surveyed are considering investing in an overseas property, and majority of them may do so in the next 6 months, with Australia being the preferred destination.
Australian properties are popular now as
• The exchange rate of SGD-AUD stands at approximately 1-1 now.
• Many Singapore students pursue their tertiary education there too, so instead of renting, the parents may choose to purchase.
Other countries of interests include Malaysia (KL & Iskandar), United Kingdom (London) and Thailand (Bangkok).
Finding 6: Singapore Properties remain a viable long-term investment (Chart 28)
Although the current sentiments are somewhat negative now, properties remain a big draw for investors, with 95% of respondents seeing properties as an investment for the long term.
While it makes sense to take a long-term view when investing in properties (for potential capital gains), rental yields remain important now, especially to owners who are highly leveraged, i.e. high loan & installments.
Owners who borrow to the maximum available loan, may encounter a situation where they run into negative cash-flow, i.e. rentals become insufficient to cover expenses (mortgage, maintenance, property taxes and so on).
The question is how long one can hold out, while waiting for capital gains to happen (which may be years later).
Singapore properties remain attractive for the long-term because of:
• Government’s resolve, to have a stable property market that trends upwards in the long-term
• Economic growth, through Future Growth Industries and Markets
• Increasing the workforce’s capabilities, with future skills to meet the Future Markets, locally & regionally.
By developing new skill sets (Corporate and workers alike), Singapore will then attract companies to operate here, resulting in economic growth that will fuel the property market’s long-term growth.