Property Prices likely to go up again in Singapore...

[Dennis Ng]

Barring unforeseen circumstances, Singapore property prices are likely to continue to rise after the recent "breather" (consolidation, NOT correction as the press has put it).

Why?
Look at all the recent land sales, Beach Road, AMK - all done at record prices.

Many en-bloc sales were done last year and this year. Many of the en-bloc sellers would be receiving their cash soon and looking for replacement homes or even buy more properties soon. The supply crunch (insufficient completed properties vs demand) is expected to continue in the next few months till mid-2008 at least.

Look at the Boon Keng Road HDB flat developed by private sector - expected to go for S$500 psf or higher.

Imagine if a HDB flat is selling for S$500 psf, indirectly, it would put the "floor price" of Low End Condos at probably S$700 psf or higher.

Now condos selling at S$1,000 psf to S$2,000 psf would be considered mid-tier.

And high end would be S$2,000 psf to S$3,000 psf. And the super high end is S$3,000 psf upwarrds.....(to S$5,000 psf).

With higher land cost and construction costs at about S$200 psf, (much higher than 3 years ago), even if property market crash, prices are UNLIKELY to ever go below S$500 psf for lowest-end condo. (it was about S$350 psf in year 2004).

As usual, your opinion can definitely differ.

[Dennis Ng]

U.S. Fed's decision to cut interest rates by 0.5% actually can be seen as negative. Why? It shows that Fed deems the "credit crunch" TRIGGERED by Sub-prime woes to be more serious than they earlier estimated.

Here's my prediction for the future:

1. FED will continue cutting interest rates in a bid to keep U.S. economy afloat till the Presidential Elections.

2. U.S.$ exchange rate would weaken due to the rate cuts now and in the coming months

3. Oil prices would emerge as another problem the World faces. Oil prices have already creeped up to over US$80. I remember when it first cross US$50, there was lots of concern about Oil prices, ironically, now that OTHER PROBLEMS take centrestage, Oil Prices over US$80 so far has not attracted any media attention.

4. Instability at Iran is another Potential Problem that can be very big or not so big depending on how events unfold.

5. U.S. Housing Market is set to continue its decline. Fed's curtting interest rates can try to help minimise the "blood letting" of subprime woes but it cannot tilt the Supply Demand situation of U.S. properties.

6. U.S.'s stock markets might actually go up in the next few months as interest rates are cut, Dow might break 14,000 or even 15,000....markets have to go higher so that they can Crash.

7. China's Stock Market bubble is also likely to get bigger and bigger before the eventual burst (likely after Beijing Olympics)....China's govt is trying to slow down the bubble by diverting funds to HK stock exchange. HK Stock index would break new high and new high again.

8. Singapore's stock market might break 4,000 or even go to 4,300 as predicted by Simon Sim (Author of Joseph Cycle). However, as I have mentioned many times, as markets go higher, one should invest less and less of your money rather than putting more and more money at risk. Remember, as markets move higher, risks increase, NOT decrease.

9. Singapore Property Market would continue its uptrend after the recent breather in Aug (7th month).....enbloc would start to roll again after developers digest the increase in DC charges and the changes in en-bloc rules. Lehman Brothers have predicted that property prices in Singapore would seee further upside of 26% with Landed Properties and Commercial Properties to be the "stars" in the coming months.

Above is just my personal opinion. You can definitely have a different opinion.

Remember that we must plan for the worst case scenario that what if we are wrong would we still survive financially? It is never wrong to be better prepared than others.

Below show you extract of an article I read which shows that U.S. Fed is really concerned about U.S. economy.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

'Global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans,' the Fed chairman said. The situation, he acknowledged, 'has created significant market stress'. The meltdown in the housing and mortgage markets has shaken Wall Street and small investors alike.

Sub-prime-mortgage borrowers facing foreclosure may lose their homes at a rate above 50 per cent, higher than the historical average, Mr Bernanke said.
'That ratio may turn out to be higher in coming quarters because the proportion of sub-prime borrowers, who have weaker financial conditions than prime borrowers, is higher,' the chairman said

[Dennis Ng]

Hi Dennis,

What advice would you give to someone who is looking to buy his first house? I am open to both (resale) HDB and private....but obviously prices are at all-time high. Should I wait until 2009 and continue renting (am going to get married soon)? My rental is around $800, so I was thinking that I may as well as start paying mortgage.

Thanks!

Ps: where did u find the freehold appt at $500psf?

Hi Kepin,
thanks for your message, let me share my thoughts with you below:

P.S. the $500 psf freehold apartment I saw was in early 2007, prices are likely to be about 10% to 40% higher now.

Firstly, I like to highlight that nobody has a crystal ball, so I cannot predict prices.

However, HDB is going to let private developers devlop and sell HDB flat in Boon Keng Road and they are expected to be sold at S$500 psf or more.

I personally would think any HDB flats demanding more than S$100,000 Cash Value as ABNORMAL.

Now you can see such transactions happening as the demand is boosted by en-bloc Millionaires (who might pocket S$2 million to S$5 million). Thus, for these people, when they look for a HDB flat, they are looking at the ABSOLUTE total price (eg. $700,000).

They are NOT bothered by the Cash Value (whether it is S$100,000 or S$150,000 above Valuation) since they don't need a loan at all.

During the last cycle we have seen people paying over S$100,000 Cash Value. Todate, most of them will still lose money if they sell their flat today, despite waiting for more than 10 years.

No one can really predict the market though.

Thus, importantly if you buy a property to stay, the key things to consider are:

1. can I comfortably afford the Housing Loan instalment NOW and in future. It is suppoed to be "Home Sweet Home", don't make it a "Home Sweat Home".

As a guide, I would suggest that your total Monthly Debt repayments including Housing Loan, Car Loan and all other loans should not exceed 35% of your Gross Income.

For instance, I bought a HDB resale 5 room flat in 1995. The price went up another 35% before it reached the peak in 1997, then prices crashed and it ever dipped to 10% below my purchase price. However, as I can comfortably afford the monthly instalments, I would not "sweat" even if prices dropped more than 10% below my purchase price.

2. You should aim to pay off your Housing Loan by the time you plan to retire. For instance, if you plan to retire at age 60, you should not stretch your loan beyond age 60.

3. Standby Cash/CPF sufficient to pay for 6 months to 2 years of your Housing Loan instalment just in case you might lose your job or income.

4. Get Insurance (Mortgage Insurance or other insurance) sufficient to cover your Housing Loan instalment so that in case anything happens to you, the Housing Loan will be fully paid off (especially if you plan to get married as you have stated).

[Dennis Ng]

The following information is extracted from Sunday Times 30 Sep 2007:

Prices Rising in Upper East Coast Road:

By the end of 2008, we predict the following benchmarks will be achieved for new and luxurious condominiums along Upper East Coast Road:

* S$1,200-1,700psf from Siglap Centre to Bedok South Avenue 1
* S$900-1,400psf from Bedok South Avenue 1 to Bedok South Avenue 3
* S$700-1,100psf from Bedok South Avenue 3 to Eastwood/Bedok Camp Area

Rentals have been rising steadily, supporting capital values growth. Capital values will also see upward pressure from home owners displaced from enblocs in Katong, Telok Kurau, Marine Parade, East Coast Road and elsewhere.

Potential enblocs in the near future may include Ocean Park, Rich East Gardens, Bagnall Court and Eastern Lagoon I and II.

[Dennis Ng]

I read in today's newspapers that HDB is selling 4-room flats in Telok Blangah for as high as S$400,000 or close to S$400 psf.

Thus, again HDB is raising the floor price for properties in Singapore by adjusting prices of New HDB flats upwards.

[Dennis Ng]

From my observation, Nov and Dec 2007 were quiet months, (especially Dec). However, from Jan 2008 onwards, Housing Loan enquiries are picking up, which might mean that market activity is resuming.

Prices are stable (similar to about 2 months back), unlike in earlier 2007 whereby prices increase almost every week.

Personally, my view is that as long as there is NO crash in stock market, Singapore Property Market should remain firm with upside of 5% to 15% in year 2008. Of course, steep rises of 30% are unlikely. (Note: high-end property prices seemed to have reached plateau though).

The stock market is jittery though, one day up and one day down....looks like a tough battle between the bulls and the bears.

Just my personal opinion. You can definitely have a different opinion.