Recently I had a buyer ask me when property prices will fall off their recent highs. I replied, "When people like you are less 'kancheong'"
For those who do not understand, I am telling the buyer to calm down. Not to panic. The market will correct but as to when it will correct? It depends on buyers. If buyers still rush into the market, the market will inevitably rise. Why then am I so sure that the market will correct? Just to name a few reasons...
1) Prices do not reflect fundamentals. Singapore is moving towards a technical recession. is. two consecutive quarters of smaller growth as compared to the previous quarter. Though it can be argued that this is because of the extremely stellar growth figures posted in the first quarter of 2011 and the next few quarters cannot keep up with such figures, we still must realise what a technical recession will have on overall general sentiment.
2) Interest rates have only one direction to move and that is up! Currently we are at historical all time lows. Banks are flushed with cash and need to lend at rates close to nothing to get rid of excess cash. Perhaps the Singapore economy was more resilient than what we expected it to be. Resilient package did a little too much. Inflation is really high currently, financing is cheap, the economy has overheated due to too much governmental intervention.
3) Singapore should be moderating the rate we import foreigners. Despite whatever is said about the benefits of foreign talent, I still support a "Singaporean first" policy. If PM Lee is true to his word, and I believe he will be so, then the influx will moderate, demand for housing will fall, rental rates will ease thus lowering rental yields. Prices of property should come down. Anyway there are too many Singaporeans holding more than one property.
4) The most telling reason there will be a slowdown is because of the circus that is happening in Europe. You may have heard of a German television show mocking Singaporeans for drinking reused water (NEWater) and taking temperatures before we enter a building (SARS period). Well perhaps they are a larger joke. The Eurozone is not going to hold. Greece will most probably default and there is little Germany can do to prevent it. The Eurozone was doomed to fail from day one. How can a country forsake it's economic sovereignty when it is an independent state. Imagine Singapore, Indonesia and Malaysia merging to form one currency. The beauty of capitalism is that everyone in the system must be responsible for his own economic decisions. I'm sorry but the Euro is an extremely flawed system and the Europeans must learn to pay for things through savings rather than borrowing.
Hopefully I am right. We have had a great run up in property prices. There should be a period of consolidation.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
