HOW COME SINGAPORE Real Estate PRICES INCREASE IN VALUE

HOW COME SINGAPORE PROPERTY PRICES SHOOT UP

“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property expected to continue to rise despite govt measures, Karamjit Singh)

We read Mr. Singh’s comments and we did a bit more analysis. We agree with Mr. Singh’s comments. (Read the following for the detailed breakdown)

Singapore’s inhabitants (in ‘000s) with respect to the Singapore department of statistics are: -

Year Total Singapore

Residents

2000 — 4,027.9 — 3273.4

2001 — 4,138. — 3,325.9

2002 — 4,176. — 3,382.9

2003 — 4,114.8 — 3,366.9

2004 — 4,166.7 — 3,413.3

2005 — 4,265.8 — 3,467.8

2006 — 4,401.4 — 3,525.9

2007 — 4,588.6 — 3,583.1

2008 — 4,839.4 — 3,642.7

2009 — 4,987.6 — 3,733.9

The inhabitants increase in 2006 over 2005 is a net surge of 135,600

The inhabitants growth in 2007 over 2006 is a net growth of 184,000

The population increase in 2008 over 2007 is a net growth of 250,800

The population increase in 2009 over 2008 is a net increase of 148,200

There is a nice table at http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html which shows the relative expansion rates of HDB. We are not against importing talent, but not even the USA have such a huge import quota. We are worried that the government has run out of ideas to grow the economy and is resorting to brute force economic growth.

Based on household size of 3.5 people (Source: Singstat), this would translate into a potential housing demand of: -

2006 – 38,743 units

2007 – 52,571 units

2008 – 71,657 units

2009 – 42,342 units

“In year 2006, we were building about 2,400 new flats. This year, we are

building about 8,000-plus new flats. Supply has gone up to meet demand. That’s

why HDB prices have gone up but they have not gone through the roof.” (Source: Straits times)

MASS Real estate market HDB BEING PROPPED UP

Several of these new stocks were “Built-to-order” flats which often can require 3 to 4 yrs to finish adding to serious shortages of HDB flats.

Singapore resident’s need from Household formation (Marriages) come in at a range of 23,000 to 25,000. These new households clearly need somewhere to reside. Why did not the HDB forecast the need? Marriage rates is something that is very hassle-free to approximate and very steady over the years.

Besides that, even though not all immigrants are given Permanent resident (PR) status, these men and women must usually end-up staying somewhere raising leasing yields.

Leasing prices are being pushed up.

Hdb property prices are being raised

WHAT IS THE LIKELY Impact?

Devoid of much option, Fussy Singaporeans will be forced to choose undesired locations for instance Punggol which in the past has excess units. Not only that, some may not wait and instead go directly to buy private housing.

HDB flat house owners whose property valuation have increased and are sitting on profits will now consider to sell their HDB and buy a private unit instead. There is currently no shortgage of supplies of Private properties at around 60k units over several years. This is easily 7 to 8 years of supply based on average consumption trend.

The end consequence is that a greater proportion of people may very well end up residing in Condominiums and private apartments. This will deplete supplies and bring smiles to property developers in Singapore.

The Singapore government however would be joyful that selling prices of land will surge and reach the land’s minimum reserve price to trigger a bidding process. Additional land sales equal more revenues for the government. And more developers bidding for land means higher prices. These higher prices are then translated into more costly priced condominiums. Singaporeans should work even harder and hopefully earn more to pay for such private apartments or condominiums of which the significant price constituent is the land price.

PERFECTING THE ART OF MICRO MANAGEMENT

Singapore has perfected the art of micro-management. At $8000 household income, HDB income limit, you are not able to buy HDB flats. At $10,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore. At a household income of $10,000 onwards, the Singapore government strongly encourgage you to move upwards in consumption. Consumptions helps growth tax revenues (annual property tax, stamp duty, transaction fees for home agents which translate into taxes), and helps the economy in creating jobs.

WHAT THIS Suggests Pertaining to THE SINGAPORE Home New home buyers AND THEIR mortgages?

If you are Singapore Property buyers, you ought to be aware that there is a progressive variation in Singapore Government policy in play. The government is the largest land-owner, it can control supply to control prices. Being an honest and efficient Singapore government bent on maximising land productivity, you can expect land prices to continue to rise and set new standards.

These simple or not so subtle policy plans will either enrich or impoverish you. And when you look at your Singapore housing loans, you ought as well to take care to select the right structure to capitalize on these unwritten government guidelines or mis-calculations.

We do not uphold or reject any government policies, we only spotlight such policies to the awareness of our readers so that they can find ways to benefit from these policies or effects of government’s miscalculations.

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HOW COME SINGAPORE Real Estate PRICES INCREASE IN VALUE

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