I am no property expert but even I have to say that signs of a
property bubble are beginning to show.
While we were still in China, my husband and I have been
monitoring the Singapore
private property scene for years hoping to buy a condo before we
shift back. The price just didn’t seem right. With our rather sudden
repatriation back to Singapore this year, we thankfully still have our cosy HDB
flat to live in. But like most Singaporeans, we aspire to “upgrade” to a
private property. Part of the reason for the shift was to be nearer to our
children’s schools so that hours do not have been wasted on commuting. But
signs of any property price slowdown, if any, are muted. So, we wait. And
we wait.
Just last week, news of the launch of Singapore's most expensive
suburban condo, Sky Habitat in Bishan, made me sit up. Almost 70 percent
were sold during the weekend launch and majority of them to
Singaporeans. Average prices range from $1,747 psf for a one-bedder to
$1,642 psf for a four-bedder at this leasehold project. A 3-bedroom
apartment would cost about $2 million! If you were to check the URA
website, these psf prices are even higher than older but mind you, freehold
condos nearer to the city! Twin Regency in Tiong Bahru, for example, was
last transacted at $1,500 psf.
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| Sky Habitat Source: www.capitaland.com |
The above calculations also hinge on a crucial assumption: a
thriving economy that can sustain jobs and good pay. The sad thing – as we
have learnt in recessions before – during bad times, jobs and salaries get cut
or interest rates may creep up in tandem with global rates during bad
times. When the odds are against you, a property is not as liquid as
stocks – it’s just not something you can get rid of as and when you want to.
It was not so much the high pricing of Sky Habitat, but what
buyers of the expensive condo said, that gave me a sense of deja-vu. One
civil servant was quoted by The Straits Times as saying he is confident that
the value will be higher when he eventually sells it 10 years later. There was
also a sales executive who bought two 3-bedroom units before he even took a
look at the showflat. With the intention to rent out both units, he
commented that he had “not 1 percent of regret” about his purchase.
I remember such optimistic comments being uttered too in the
property run-up of 1996, a time when long queues formed at property launches
and buyers made their purchases before stepping into
showflats. Additionally, there is now a false sense of security because of
the historically low interest rates. Rates are not going to stay this low
for the next 30 years of the loan term. A one percentage point increase
can result in an additional $600-$1k repayment every month, depending on your
loan amount. Bear in mind too that much of the repayments in the first few
years go toward paying interest, not to the loan principal.
Prices which run up too quickly are bound to
come down – this is one of the easily-forgotten laws in any market which are
cyclical in nature or for which government measures can have a deep impact.
I do not wish for anyone to be caught on the way down but it looks like
history may just repeat itself.
(This article first appeared in CPF's IM$avvy website.)