Real Estate Market Outlook 2018 – The what’s whats and why

Real Estate Market Outlook 2018 – The what’s whats and why

by Jeremy | Jan 10, 2018

Real Estate Market Outlook for 2018

The million-dollar question:
“Should we buy a private property now to ride on the market trend or wait till the market takes off completely and by waiting, will that risk missing out on the cycle?”

Did you realize that the question no longer involved ABSD like; “Shall we wait for Government to remove ABSD then to consider to buy?”

After the introduction of TDSR back in 2013, the market have endured 15 straight quarters, or close to four years, of decline in the URA private residential property index. In the beginning of 2017, we finally witnessed healthy take up rate from the primary market and as the volume of transactions picked up, Q3 was the turning point where the first positive increase in URA private residential property index since 2013.

Enough Said, what goes down should eventually go up.
This time round, it makes absolute sense to expect prices to rebound and remain strong because of all cooling measures are still in place. Comparing the current market situation (not a crisis but cooling measures by Government’s intervention) against past crisis periods and how long it last.

Asian Financial Crisis (1997) lasted about 10 quarters with 45% decline, Dot-com bubble & SARS outbreak (2000) lasted about 15 quarters with 20% decline, Global Financial Crisis (2007-2008) lasted about 4 quarters with 25% decline and cooling measures (2010-2013) lasted about 15 quarters with 12% decline.

As you can see, the Government did a great job with the approach of “soft-landing” cooling measures and since the preventive measures are still in place, it makes the market really stable and the rebound we are about to experience will be fundamentally strong and long lasting. However, it will be unlikely to see prices spiking like previous market recovery because as mentioned, this is Government’s intervention on cooling measures and the Government Land Sales confirmed list has stabilised since 2H2016 around 2,170 private housing units to 1H2018 around 2,775 private housing units.

Insufficient land sales turn “hungry” developers to seek for collective sales.
The enbloc fever is one major trend in 2018 to watch out for and why? Simply because the money developers paid for Government Land Sales Programme (GLS) goes straight into the Singapore’s reserve. On the other hand, enbloc deals allow the money to flow back into the property market.
For example, owners of enbloc-affected developments potentially need to find a new home (or two, for investment), there is a high possibility that the enbloc-proceeds will be partially invested back into the local property market.

Make a guess how much are we talking about here? It’s a whopping >$8b worth of proceeds with a good percentage potentially re-invested back to the market. While the previous uptrend in the property market were mainly caused by speculators and foreign investors, this round, the potential buyers in the market are locals by large and buying for their own-stay purposes, replacement homes (more than 3,000 enbloc-affected families) rather than for investment purposes.

Here are some other evidence for property market uptrend, for example:
• The rise in transaction volumes, which suggest a narrowing between buyers’ and sellers’ expectations;
• growth in price index from since late June 2017 implied by the upward revision in URA’s price index value in Q3;
• price increases in the resale segment, evidenced by SRX Property’s monthly indices;
• Developers cutting-out discounts islandwide signals price increase; and
• Aggressive land-bids and enbloc fever.

Numbers don’t lie.
Private residential transactions was about 23,113 in the first 11 months of 2017 which already surpassed the entire year of 2016 at 16,378 transactions. New private home sales excluding EC, pushed to 10,247 units sold in the first 11 months of 2017 which also surpassed the 7,972 units sold for the entire 2016.

While a handful of yield-driven investors are concerned over the current weak rental market, please be aware that most tenancy agreements are signed for 1-2 year lease and cannot see much changes overnight but the numbers/facts stated above definitely signal an optimistic long-term growth and capital appreciation to genuine investors who choose to ride on the wave in 2018!

Read more on BT’s latest article on 2018 outlook below

Happy Investing!