Expect the Worst Recession in Singapore History and Property Will Crash

26

So says a shocking Citi report on Singapore property.

Citi expects our GDP to contract by 2.8% this year, “making it the most severe recession in Singapore history.”

As for property prices, the report also says that a crash is imminent (see related article: Property Must Crash).

Condominiums in the mid-tier segment is expected to have a price decline of a further “35% from current levels, or … 45% from their peaks”, with luxury condos faring worse.

But mass market prices are “likely to hover around the 1998 lows rather than the (lower) 2003 levels.” [Editor’s note: mass market prices are generally lower in 2003 than in 1998 even though URA price index for the overall market shows otherwise.]

On condos sold on Deferred Payment Scheme (DPS), which was suddenly withdrawn in late 2007, Citi has this to say:

“We are increasingly concerned about projects launched close to the peak of the market and sold on deferred payments. … With valuers and banks taking a more cautious stance on the market, buyers who have purchased these units as investments are likely to face (1) lower loan-to-valuation (LTV) ratio of 70% or less for investors; and (2) significantly lower valuation from purchase on the back of falling prices.”

The report goes on to list selected condo projects that will obtain TOP in 2009.

Of the 25 projects listed, 1 has a price change of 0% (Casa Merah) and 5 have a price change of -5% to -11% (Tierra Vue, Ardmore II, RiverGate, Grand Duchess at St Patrick’s, and One-North Residences).

This means that 6 out of the 25 condo developments are now selling at launch price or lower!

Fortunately for some investors and owners, the following projects are still sitting on double-digit profits: One Jervois, Carabelle, ClementiWoods Condominium, The Inspira, Imperial Heights, The Centris, Newton One, The Esta, The Beacon, and Tribeca.

But for how long?

Will we hear of more stories like the couple who got stuck with property?

Share.

About Author

26 Comments

  1. >But for how long?
    The Centris is already in trouble, going by the aggressive help they’re giving to the DPS buyers- mortgage roadshows and all. See yesterday’s Straits Times back page.

  2. Pingback: Links of the Week - January 19th | Armchair Theorist

  3. Justwanttostayinajob on

    I have been praying hard for property market to crash. Hopefully price can crash another 40% or more. I sincerely hope so.

  4. my friend…there’s a difference between being greedy and being realistic…being greedy doesn’t only mean wanting more $$$

  5. dontmakemelaugh on

    I have been hunting for a decent condo, but what you say of an impending price crash is simply not there…its a tug of war out there

  6. I think extreme views are not the way to go here. Yes, property prices are likely to go down but the use of the word “crash” is too extreme. It’s probably more pertinent to talk about the extent (or “how much”) that prices would fall. And even then, we need to be able to clearly analyze private property prices for condo and landed houses differently. Generally, all the talk about falling private property prices are with reference to private condos – those in prime areas (the so-called luxury condos) are likely to be the hardest hit as they are more prone to speculation and investment (and as such, their prices are quite highly inflated) while those in the non-prime areas (suburban condos) are affected to a lesser extent as they are mostly purchased for personal stay (assuming that they were not bought at exhorbitant prices in the first place). At the end of the day, everything – from property to stocks to cars – is subjected to the logic of economics…demand and supply…willing buyer and willing seller… If a seller has holding power, the seller will not sell if the price is not right – all things being equal, home owners are likely to have holding power more than speculators…this is the reason why the luxury condos are hardest hit…the speculators who cannot hold will sell their units at a much lower price… On the other hand, home owners of suburban condos do not have to lower their asking price (if they are in no hurry to sell). With the above in mind, we still have to factor in the age of the property, whether it is leasehold or freehold, the condition, etc. If you are buying a brand new condo from a developer, again the question is whether they are able to hold onto their units if their asking price is not met…big developers with holding power are less likely to lower their asking price beyond a certain psf limit…they would rather then try to lease out the units instead or delay launch/construction. Also, the government is now trying to help them out by looking at things like property tax relief etc. IMHO, it’d be those smaller developers with lower holding power that would be more vulnerable.

    With regards to private landed homes, the prices are less volatile as most have been purchased for personal stay. To be sure, their prices would also be affected by falling private condo prices as well but because of the element of land, landed private homes would not fall as drastically (especially given the scarcity of land in Sg). Again, with the above in mind, we still have to consider if the landed property is leasehold or freehold – just like leasehold condo, leasehold landed is likely to lose value over time although the rate of depreciation might not be as high as that of leasehold condo.

  7. Dear Observer, Your holding power argument can be applied to stocks and shares too, but the fact that the stock market has already crashed more than 50% shows there’s a flaw in such arguments. Besides holding power, many many other factors come into play such as demand, supply, jobs, income, bankruptcies, failed investments, foreign investments, sentiments, etc etc. It is well known that the property market lags behind the stock market. And we ARE already in the beginning of a property crash.

  8. Dear flaw, stocks and shares are more prone to speculation than property…that’s one of the reasons for the lag difference. People who hold stocks and shares with a long-term view are also likely to be people with holding power. These are the ones who would not sell. Unfortunately, as I’ve said, there are a lot more speculators in the stocks and shares market. Thus, price fall is more drastic in this instance. Ultimately, comparing property prices to stock and shares is like comparing apples to oranges…the comparison is not quite equitable.

  9. Incidentally, holding power SUBSUMES things like income, bankruptcies, failed invetments, etc. For instance, if you lose your job, you lose your income, you no longer have as much, if any, holding power. You might then have to sell your property. So, the fundamental and crucial factor, IS holding power…in economics-speak, this is the most parsimonious explanation, all things being equal. Also, I did NOT dispute the fact that property prices will fall…I only cautioned the use of extreme words like “crash”…to me “crash” means a total decimination of value… property prices have to reach near $0psf…while stocks and shares can reach close to $0…like $0.10…property prices are unlikely to be likewise…if anything, the government wouldn’t let it… But I’d agree that property prices can dip to relatively low psf…perhaps for prime condos that had been >$1000psf…the price would go down

  10. Dear Observer, I think you are wrong about property being less prone to speculation. There are many speculators and specuvestors or whatever you call them. And many of them buy on MARGIN (think DPS). Unlike contra traders in shares, these speculators take a longer time to unwind their failed investments. Anyway, let’s agree to disagree. Time will tell whether the property market will crash like it crashed in the late nineties.

  11. Dear Flaw, property speculation involves more initial outlay than share/stock speculation, especially since the government has taken to removing DPS. I do agree that those who had speculated using DPS are more vulnerable to the downturn, especially if they have no holding power. Again, I’d agree that if they are caught in this downturn, and they want to get rid of their property, the turn-around time is going to be longer than stocks/shares, which are typically more immediate. So again, it all comes down to holding power – some speculators can, some can’t; and because of the latter, property prices will go down. I think you and I agree on this. The only question is “by how much”. Our disagreement I guess is on the usage of the term “crash” – I take this to mean that properties will become virtually valueless, close to $0psf while you obviously take it to mean something else. But like you said, it doesn’t matter – everyone sees things differently, even when it comes to term usage and definition. Cheers!

  12. Dear Observer, I go by the conventional definition of “crash”. For example, our stock market has crashed 50-60%. But for property, a 40% drop would suffice for me. 🙂

  13. Dear Flaw, I’m not sure if that’s a conventional definition…which is the problem of the word “crash”…it is relatively subjective – different people define it differently. Personally, I prefer to use the term “bottoming out”…it’s less extreme and possibly more objective….in any case, your point is taken. Cheers!

  14. Pingback: Use Discount Coupons if You Want to Be a Millionaire! | Kelly's MyQute Fairy-Angel Lifestreaming Bloggie

  15. evil thought: those who were too bullish and have bought property during the red-hot days, but have just lost their jobs in recent weeks, they’d be doing fire sales, that’s when prices can drop, yummy!

  16. To sm: the conventional wisdom is that property in the prime areas (i.e., near city) would be popular with expats. Other considerations include amenities and closeness to public transport.

  17. so far, I think the prime districts 9 10 11 have gone down quite a fair bit. i would target the freehold properties there for long term investment. note also that due to the poor rental market now, you may not collect enough to cover your mortgage installments. invest wisely!

  18. Pingback: Property Prices Out of Whack | Salary.sg - Your Salary in Singapore

  19. Pingback: Property Prices Out of Whack - Salary.sg Forums

  20. kenwood bill set on

    Ukrainian forces, although professional, are outnumbered in both troops and equipment by the Russians, a fact that’s hard to ignore. bomb shelter DIY Ukrainian forces, although professional, are outnumbered in both troops and equipment by the Russians, a fact that’s hard to ignore.

Leave A Reply