Real estate trends in Singapore

Today Singapore population is 5.736.319 and counting. This is per latest United Nation estimates. The total Singapore land is 700km2 meaning the density is 8155 people per km2. A 101.8% of the population live in the urban centre. With such data, one thing is evident, land scarcity. With the population expected to continue rising, the market is in an exponentially high demand of housing than supply. Did you know Singapore is the 29th most densely populate city in the world? Let’s have a closer look at Singapore real estate values and explain some of the projection every future homeowner should be aware of.

Boom and bust cycles of Singapore real estate

Singapore real estate is a subject of the global economy. When there is a surge in the marketplace, real estate values in the country goes higher as well. When there is a bust in the global economy, real estate values drop as well. The reason behind the positive correlation is because investor appetite heavily influences Singapore real estate. When the economy is doing well, they investor drive the prices up. Come global economy bust; the demand disappears as investor restrain from investing. According to statistics, landed real estate values dropped by 17.6% in 2008 due to global financial crisis. The economy had since started to recover with prices increasing by 87.7% with the highest amounts seen in 2013 before the government enacted measures to slow down the trend.

The current Singapore market

Since the peak in 2013, real estate values in Singapore have been on the downward trend. This is despite the increase in demand. In the last 13 consecutive quarters, real estate value for landed and no—landed has to feel down by 10% and 8% respectively. This is good news for Singaporean.

For a long time, Singapore market was profoundly affected by Asian Financial crisis with the prices doubling in 2009. Most financial observers say that despite the government intervention, Singapore real estate is a bubble and not unless the government uphold favourable prices to both investors and homeowners, its stability will collapse.

The private residential property index fell by 2.77% in the first quarter of 2017. This is the 13 consecutive fall in year to year real estate price as per Urban Redevelopment Authority. When adjusted for inflation, home prices fell by 3.45% in 13 quarters.

Below is the fall in prices for various regions.

Core Central Region

Prices of non-landed residential properties fell by -2.6% inflation-adjusted and 1.9% y-o-y to Q1.

Outside central region

Properties prices fell by -2.6% (inflation adjusted) or 2% during the year to Q1 2017.

Rets of central region

Property prices were down by -3.2 %( inflation adjusted) or 2.5% over the same period.

Government policies effect on real estate

According to Savills, the price of high-end homes fell slightly by 0.2% in Q1 2017. This brought it to an average of US$ 1, 631. This continued decline in house price is as a result of deliberate government policies. Before the 2008 global economic crisis, Singapore market experienced an overheated market with residential property price index rising to 38.2% in one year. Since then, the government sensibly began to impose measures which continue mitigate similar future scenarios. Below are some of the actions the state enacted in the recent years to cool down real estate prices in Singapore.

Higher stamp duties to short-time home buyers

To an average property buyer, buying a home is a long-time investment. However, most real estate investors aim in selling the property in the shortest time possible. To discourage such type of buyers, the government has put in place several seller stamp duties which only impact those aiming to buy a home in less than four years.

Loan repayment must not exceed 60% of the borrower monthly income.

This policy, established in 2013, means that if a home buyer earns an SGD 10,000 per month, the monthly loan payment must not exceed SGD 6,000 per month. In Singapore, loan interest is influenced mainly by SOR interest rates plus how much one borrows. This policy also in aiming in reducing consumer ability to acquire multiple loans where majority rush to make a purchase based on speculated market trend and later unable to repay. The policy is the contributing factor why real estate prices have declined in the last 13 quarters since its enforcement in 2013.

Higher stamp duty on any purchased property

When one buys a property, he or she is now required to pay a higher stamp duty: 1% for purchase of up to $180,000, 2% for the next $180,000 and 3% for the remaining amount. Therefore, if you want to buy a property worth $500,000, then you have to pay the government $9,600 in stamp duties. These stamp duties are now payable after three years of purchase with the rate cut down to 4% for each tier.

The above market-cooling measures have been active as mirrored by the 11% decline in Singapore property prices in the last three years.

Future real estate price projections

The low-interest trending rates continue to play a part, but some of the measures discourage other. Especially those buyers looking to rent out their property. Also, buying a condo in Singapore is not cheap, a meter squared will cost approximately US$13,500 in the core regions. However, the majority of expert expect the real estate to continue going down with the government not willing to budge despite pressure from investors. If this trend is maintain, a home purchase will be more comfortable for young professionals and families looking forward to purchasing their first home.

Regarding property stock, Singapore is set for its best performance in the recent five years. This comes after investment improved in the city-state as it looks to recover from the upbeat economy with the trend projected to grow in more than 2% by the end of this year.  Currently, property stock index was trading at a price value of 0.89% a drop compared to its performance six to nine months ago.

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