With property prices going down last year what’s in store for 2015?
The short answer in one word, tough.
Tough for developers trying to market new launches and clearing existing stock, tough for property investors hoping to make a profit, tough for sellers to sell in this environment, tough for buyers to make a decision, and also tough for property agents.
Where Are Prices Headed?
There is a multi-prong answer to this. From the local perspective, Singapore’s economy is projected to grow over 2% this year. There is not much to worry about as the government will not let the market crash if they can help it. They also do not want to see it rise too fast. With all the cooling measures still in place, it will most likely be status quo with a slight downward bias. A 3% to 6% drop for this year is highly probable.
On a cyclical basis, Singapore’s property market rose from the depth of the global financial crises in 2009 for 5 years. An up cycle lasts anywhere from 6 to 10 years. It was stopped only with the introduction of multiple cooling measures. So the current natural tendency is for prices to go up. It is therefore reasonable to assume that there is pent up demand held back by policy intervention.
What is more uncertain is the global outlook. Remember what I said in a previous post that every crash in our property market was externally induced? Well this is something everyone has to pay careful attention to this year and the next.
Europe is fighting deflation and facing recession. Greece is threatening to exit the EU which may cause the contagion to spread. China is experiencing a slowdown. Japan went into technical recession. Oil producing countries like Russia, Venezuela and closer to home, Malaysia are facing serious debt repayment problems because of the sudden plunge in oil prices.
Taken singly, any of these will not cause huge problems for our economy. But if all of these problems are not addressed and deteriorate further, a major disruption to the global financial system could ensue. This usually comes quick and without much warning. I don’t mean to sound alarmist but it is always good to be prepared for the worst case scenario.
The only bright spark is the US economy. It seems to have turned the corner and grew 3.5% last year. 2015 is projected to be just as strong if not better. The US Federal Reserve is widely expected to raise interest rates. Singapore’s rates follow that of the US, so this is another negative factor for our property market.
Confidence is what the property market thrives on. This is not the signal the market is getting. So be nimble and be careful. Invest well within your budget.