Has The Singapore Property Market Hit The Rock Bottom?

Singapore’s Prime Minister Lee Hsien Loong has expressed optimism over the country’s economic performance. He is expecting the economy to grow at a sterling rate of over 3 per cent this year, beating economists’ forecast of 2.5 per cent. PM Lee’s upbeat statement is supported by a visible pickup in economic activities including a series of blockbuster land deals that have made the news recently.

Pickup in Real Estate Investment by Developers

Property giant GuocoLand made the headline with a record high bidding price of S$1.62 billion for a 950,592sqf commercial land along Beach Road. The price per square feet works out to be S$1,702.

Leading property developer in China, Fantasia Holding Group, snagged a residential land parcel at Lorong 1 Realty Park with S$75.80 million through its Singapore subsidiary, amidst fierce competition from 10 other bidders.

The list goes on. According to a report on emerging trends in real estate market in the Asia Pacific region, done by Urban Land Institute and PricewaterhouseCoopers, real estate investment in Singapore registered a 50% increase to S$7.86 billion this year. Their explanation for this unusual surge is that investors are anticipating an impending rebound in Singapore’s property market after the prolonged slump since 2013. Students have learned in economics tuition how the expectation of future price movement will affect the supply. Please consult your economics tutor if you have signed up for an economics tuition, for a detailed explanation on this.

I believe property developers land acquisition decision is very much based on their expected Return on Investment (ROI), together with their overall sentiment of Singapore’s property market. Please approach your economics tutor for a better understanding of ROI.

Positive Market Sentiment of Consumers

On the other hand, consumers, as buyers seem optimistic about the property market outlook in Singapore as well. Recent projects launched within vicinity of MRT stations prove to be a great success. Gem Residences, a private residential project launched in 2016 was met with overwhelming response. A whopping 50 per cent of its units were snagged up within one day, even before its official public launch on 28 May 2016. This is matched by another project launch of the Stars of Kovan, which sold 60 per cent of its 395 residential units at its VIP pre-sale. Other projects of premium locations such as Sky Vue and Sky Habitat are among the hot favorites of home hunters as well. You may have learned in economics tuition how consumers’ sentiment will impact the price. Make it a case study and consult your economics tutor for an in-depth analysis.

En-bloc Sales

En-block sales has sizzled recently with a total of seven successful transactions and some home owners taking away millions of dollars per unit. The highlight among all is Amber Park, with its transacted price of S$906.7 million which works out to be an average of S$4.53 million per unit as payout to its 200 owners.

On the one hand, the surge in en-bloc sales this year shows the increased level of interest and confidence by developers. On the other hand, the en-bloc sales have successfully created some 2,500 millionaires, who with their hefty windfall in hand, will mostly likely look for good quality condominiums as their future homes. Revisit this topic with your economics tutor in your economics tuition class, explain how disposable income will affect the demand and price.

In conclusion, whether the Singapore property market has shown signs of turnaround or the slump will continue in the immediate future are just opinions. It is the developers’ business sentiment together with consumers’ market sentiment that will jointly determine the market trend moving forward. If we believe the property price will be higher, more and more buyers will swarm into the market and hence chase the price higher. Developers will also take the opportunity to raise the price, in pursuit of higher profit margins. There are basic but essential economic concepts to be taught by your economics tutor the economics tuition class.

Linda Geng

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