The 2006-09 period has been quite a ride thus far. Property prices surged some time in 2006 until 2007, followed by the sub prime housing debt’s blow-up in ‘07. In ‘08, several near collapses of substantially sized financial institutions like Bear sterns, Lehman Brothers, Citibank, UBS, AIG, Merrill Lynch and Madoff rocked the global financial industry. With a combined asset estimated to exceed US$5 trillion, the near fallout of the financial giants nearly caused an apocalypse.
This year, the US Federal Reserve System has set interest rates at almost 0% whilst also putting in funds amounting to US$700 billion to aid faltering banks. In China, the government made a commitment to inject over 4 trillion Yuan into the country’s economy in the next few years to maintain global economic stability.
Consequently, Singapore is not spared from this worldwide economic roller coaster ride. Based on the Singapore Interbank Borrowing Rate (SIBOR) for the past three months, interest rates plummeted from 3.5 percent to 0.68 percent.
In 2006-07, Singapore’s property valuations reached feverish pitch. In 2007 alone, Singapore’s population increased by 5.5 percent mainly because of in-bound expatriates. The population growth fuelled an upsurge in rental yields that subsequently drove property prices. Because of this, investors, novices and experts alike, began to speculate and purchase properties which caused the prices of properties in some areas to increase by over 100 percent. Unit prices at the 99-year lease condo Marina Sail, for instance, went from $900 per square foot to more than $2000 per square foot.
From Q3 and Q4 of 2008 to Q1 of 2009, property valuations began to drop with the meltdown of financial organisations. Because of this fall in valuation, many home owners who purchased their properties in 2006-07 at high interest rates were not able to refinance their homes. Some owners reported that their properties’ valuation plummeted 10 to 30 percent at the very least, most notably those located in Districts 9, 10 and 11.
The prices of Singapore properties recovered between March 2009 and September 2009. Though the preliminary statistics showed reduced selling prices and sliding valuations, some areas within Districts 9, 10 and 11 experienced a revival in property valuations and prices.
From January to June 2009 alone, Newton area’s Park Infinia went from approximately $1100 per square foot to $1200 per square foot in Q1 2009. Between March and June 2009, Park Infinia valuation climbed to $1400 per square foot, an increase of 30 percent.
There is a probability that interest rates may go higher, which means that refinancing will be rendered less cost efficient. Thus, Q4 might be the sole window of opportunity to renew the financing of Singaporean properties with the current 10 to 30 percent valuation resurgence. Once interest rates climb or valuations drop by the end of 2009, this window is lost. As the saying goes, strike while the iron is hot.