The latest set of cooling measures seem to be rather harsh but personally I feel it's the right step to take to make Singapore a home for Singaporeans.
The past few days I have been bombarded by my clients as to where the market would be heading. There are a thousand and one reasons as to whether the market will go up or down. However I think all reasons boil down to one main reason.
SENTIMENT
Not too long ago, majority of analysts, developers, home buyers and owners, real estate agents all thought that Singapore market was going to become more and more expensive. We live in a land scarce country and thus prices must increase. Thus buying a property is a sure bet to securing a healthy profit a couple of years later.
What a difference a few months make. Today analysts are singing to the tune that market is going to correct. One analyst from Standard Chartered even forecasted a 30% drop in home prices in the next few years.
Let's then look at what happened. In mid 2010, analysts predicted that markets had already peaked and will rise slowly in 2011. The market did not peak in 2010 and instead peaked in mid 2011 at a level 16% higher than the last property peak in 2007. We underestimated the magnitude of the property boom. This time round analysts are generally betting on a 10-15% correction. I believe that we will again underestimate the market.
Sentiment drives the market. Regulations set by the government help fuel the sentiment, be it positive or negative. The last minister in charge of national development set out policies which caused the shortage in supply and thus it fueled the euphoric sentiment that came along with a recovering economy and record low borrowing rates. Thus the ridiculous spike in real estate prices. This new minister is more people-centric and listens to public feedback about Singaporeans wanting to own affordable properties. Sentiment was that market had peaked and will come down in the near future due to the global market turmoil. His policies, which will serve Singaporeans well in the long run, will fuel the negative sentiment, causing prices to correct deeper than what we expect.
Oh well, prices are too expensive in the first place. A correction will be good and healthy and will NOT destabilize the economy. Property prices are not going to halve. This is just a wake up call for everyone not to over commit themselves. In the long run, lower prices will mean more affordable housing for the people in Singapore.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
