Hi Ashley,
Thank you for your query into the outlook into the Real Estate Market. Let me start by putting your question into perspective;
Firstly, we need to put into perspective the causes for the negativity that is currently prevalent in the markets.
Secondly, we will have to examine the underlying impact and causes of the ongoing crisis/crisis-es:
Our Global Crisis
Typical recessions are usually marked by economic recessions in one part of the world, with bright spots someplace else.
Rarely have we seen recessions or crisis happening in many places at the same time. Suffice to say, there has always been someone to take over being the growth engine of the world but one would be hard pressed to find such a white knight in these times.
China is going through a severe real estate price correction given the bubble that have been forming in the market there, the USA is experiencing high endemic unemployment, and Europe is in the midst of a currency and debt crisis.
This leaves few areas that could pull the global economy out of this coming downturn. The outcome of this is that the growing liquidity on the international scene would be flooding into these remaining bright spots in the hope of earning some form of return given the relative cheapness of borrowing money at this stage.
On the Singapore front,
The cooling measures would seek to stop this international money from reaching the residential real estate markets with the aim of keeping prices here sustainable and not to end up pricing out a whole generation of Citizens from becoming home owners. The unfortunate thing is that it is like trying to stop a flood in a leaking dam by plugging just one hole.
Ultimately, the money will flow into other asset classes rather than residential real estate.
So what can we hope for next?
Stability and Endurance
Singapore real estate is not the exception to this new phenomenon that is sweeping around the world where real estate prices are driven up as international investors seek out properties that are relatively under-priced given the state of global real estate prices in general.
Hence and therefore, intervention on the government level to stem the inflow of such funds into residential real estate will be necessary to mitigate the demand for residential real estate. However, this is akin to plugging one hole of an over-flowing dam as the funds will be flowing into alternative asset classes instead of residential real estate.
On endurance, a desirable state that would be nice to reach is that of stable and sustainable growth. Given the low interest rate environment and the large flux of liquidity that is washing around global markets, we need to hope for a return for stability in Europe, America and China such that these funds are more evenly spread out instead of being concentrated in a few areas to mitigate asset bubbles forming in the mid to long term.
In the near term, the key consideration would be that foreigners comprising of 19% of transaction volumes would now be priced out of the market, causing Singapore real estate markets to see a sharp drop in sales volumes as the collective buyer mentality shifts to that of anticipating that sellers and developers adjust their prices accordingly given the new measures.
The faster prices adjust to this new environment, the sooner transaction volumes will start to pick up again, albeit at adjusted prices.
Hence, endure.
Best Regards,
Mervin Tang
Marketing Manager
CEA Reg No. : R030951Z
Huttons Asia Pte Ltd
Mobile:
(65) 9184 0208
Website: http://www.SGrealestate.sg
Sales Enquiry: mervintang@SGrealestate.sg
Discussions: http://sg-realestate-sg.blogspot.com/
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