Singapore home loan and property market update Jul 2009

Singapore home loan and property update July 2009

Since the last time we wrote about the property market coming back to life.

The press has been flushed with lots of positive news. All these news of

property market coming back to life is fueling latent demand. Singapore is

one of those rare markets where there is ample liquidity in the market. The

liquidity is not evenly spread out.

What this means is that, the lower end of the condominium market is

supported by affordability and pricing while towards the Mid-luxury and

luxury segment, it is supported more by sentiment and investment yields.

Sales by developers are red hot. Are they clearing stock?

“Developer sales of new private homes in June hit 1,825 units – topping the

previous peak of 1,723 units homes sold in August 2007 at the property

market peak.” (Source: The Business Times, http://business.asiaone.com/Business

/My%2BMoney/Property/Story/A1Story20090716-155174.html)

There is still ample property supply in the pipeline, developers are using this

opportunity to try to clear as much stock as possible.

What does Analyst think? Is Singapore flushed with liquidity?

Some market analysts are positive that the market has reached it’s lowest

point while some pointed out that external demand is still not picking up fast

enough. There is indication that the Singapore government is doing all it can

to stimulate the Singapore economy. Just in January 2009 alone, M1 money

supply increased by 6 billion dollars to around 82 billion dollars.

Dishonest Singapore Property Agents are again active

The market is red hot, some property agents are again touting En-BLOC as

bait. The 2nd more common trick is. It’s near the MRT, got rental potential.

This appeals to greed in property buyers. These dishonest property

agents are also trying to raise the prices at the last minute even after prices

have been agreed with the property buyer. Be careful not to let greed dictate

your decisions, talk to many agents, not just 1 or 2 and cross correlate their

stories.

BE CAREFUL OF BUY AND SALE BY AGENTS

And also be careful of sub-sale activities. If you are seller, you must also be

careful and keep tabs on the market. The best is to also post your own

advertisements on a free property listing site such as ours at

(http://www.PropertyBUYER.com.sg). When buyers come in, you can also

try to establish the market price and not simply belief what the agent tells

you.

How Dishonest Property Agent trick Property Buyers

They typically try to create a sense of urgency. They may arrange for group

viewings to create the impression that a property is HOT. These are just

some of the many ways in which they cheat.

Then they agree on lower prices and then once you agree on the prices,

then they raise the prices. They claim that the seller wants to raise rates.

Some ways they trick buyers and sellers: -

•    The seller really changed their minds and raised the price. (Not so

common)

•    The agent hasn’t yet met the Seller’s asking price that you agreed with

the agent.

o    The agent tries a lower price to tempt you so as to know

your  BASELINE price.

o    Then the agent tells you a story about the seller wanting

more to try and get you to raise prices.

•    The agent pushes for a higher price than what the seller wants. Tells the

seller he will try to maximize prices for the seller.

o    In fact, the agent already got you to bite. Then he/she goes to

the seller and ask for more commission, because you agree to

higher prices.

•    The agent pushes you for a higher price. For example Seller wants

$900,000, agent asks you for $980,000. Then Agent asks his friend to

buy from owner at $900,000 and immediately re-sell to you at $980,000.

The agent makes $80,000 just like that.

What we at www.PropertyBUYER.com.sg think on recent developments?

We still maintain a cautious outlook. Despite all the huff and puff,

Singapore’s unemployment rate is expected to get worst in 2009. The

resident population employment is at 4.8% in Mar 2009 and getting higher

while the overall unemployment is 3.3% in Mar 2009.

(Source: Singstat.gov.sg)

While the Unemployment is going to hit different segments of the property

market in different magnitude, when we have an unemployment rate hitting

4.8% (for residents. Meaning Singaporeans + PR) and looking to get worst

at least in 1 or 2 quarters. We cannot be so sure it will not impact on the

general market.

Even expatriates and other non residents, they are not spared from the

recession with the unemployment rate of 3.3% in Mar 2009 and steeply

rising.

External Demand – Via US Economy

Singapore’s external demand is still unstable at best. Many of Singapore’s

exports go to the USA. And US consumers make up 70% of the US

economic consumption.

Even while US Federal Reserve bank of New york’s Timothy Geithner has

indicated that the US is out of the Financial crisis, but unemployment figures

are still high. Jobless rates are about 9.5% in June 2009, an increase of 7.2

million from Dec 2007.

(Source: Bureau of labour statistics, USA.)

The US unemployment is still looking to breach the 10% mark. This means

that until the US unemployment rate recovers, Singapore’s exports are

not going to see drastic recovery.

Will China replace US as the economic locomotive of the world?

The China (2008 estimated) GDP figures in USD (by CIA factbook) is

US$4.222 trillion. This is in contrast to the (2008 estimated) US GDP figures

of US$14.33 Trillion. The US consumers make up US$10.031 trillion of the

US GDP. The Chinese consumers meanwhile makes up less than half of

China’s GDP of US$4.222 Trillion.

Even while China is producing headlines after headlines of robust GDP

growth, China’s consumption is not going to pull us out of recession as it is

small compared to the overall global trade. Moreover, most of China’s GDP

is still export oriented, and exported to the USA.

According to Bureau of labour statistics (http://www.bls.gov/news.release

/empsit.nr0.htm)

“The number of unemployed persons (14.7 million) and the unemployment

rate (9.5 percent) were little changed in June.  Since the start of the

recession in December 2007, the number of unemployed persons has increas-

ed by 7.2 million, and the unemployment rate has risen by 4.6 percentage

points.”

According to BEA, http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

The economy is still somewhat in the doldrums.

GDP in Q1, 2009 is still decreasing although at a slower rate.

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 5.5 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to final estimates released by the

Bureau of Economic Analysis.  In the fourth quarter, real GDP decreased 6.3 percent.” (Source: Bureau of Economic Analysis)

However Personal consumption is increasing again.

Personal consumption is running down the inventory stock. But production is

still not increasing yet and therefore it has not yet contributed to GDP

growth.

“The real change in private inventories subtracted 2.20 percentage points from the first-quarter

change in real GDP, after subtracting 0.11 percentage point from the fourth-quarter change.  Private

businesses decreased inventories $87.1 billion in the first quarter, following a decrease of $25.8 billion

in the fourth quarter and a decrease of $29.6 billion in the third.”

(Source: Bureau of Economic Analysis, USA)

This run down in inventory level is led by reduced production (Less GDP

output) and a slight increase in personal consumption.

“Real personal consumption expenditures increased 1.4 percent in the first

quarter, in contrast to a decrease of 4.3 percent in the fourth.  Real

nonresidential fixed investment decreased 37.3 percent, compared with a decrease of 21.7 percent.  Nonresidential structures decreased 42.9 percent, compared with a decrease of 9.4 percent.  Equipment and software decreased 33.7 percent, compared with a

decrease of 28.1 percent.  Real residential fixed investment decreased 38.8 percent, compared with a decrease of 22.8 percent.”

(Source: Bureau of Economic Analysis, USA)

BANKS MUST DO IT RIGHT THIS TIME ROUND!!!

This month the banks are so busy that they hardly have time to entertain

Approval-in-principle. The banks are responding mostly if you have an

Option to purchase before they will process your applications.

While we understand the reasons because the market is booming and banks

are over-stretched due to staffing reasons.

But by reducing rates and then forcing the home buyers into buying first and

then getting the loan later has started to create upward price pressures.

If they lend indiscriminately when the market picks up, then the banks will be

accomplices in creating another property bubble.

This bubble is going to come haunt all of us again.

So this time, we urge all banks to act responsibly and not add fuel to fire.

Though we are still really doubtful that this is it.

Redundancy is still accelerating

WORST SCENARIO

In case this is not yet the turning point, then many people would be caught

buying into expensive property developer launches. When the market reality

sets in, banks will again over-react with some banks freezing lending

completely choking off the market. This is when home buyers get hurt again.

WHAT DO WE RECOMMEND FOR SINGAPORE PROPERTY INVESTOR?

We have no opinion about buying or not buying. People buy properties for

various reasons. There are good deals in all cycles of the property market as

well as bad deals.

Exercise your own caution and decide what fits your finances the best.

The economy is still not out of the woods, job vacancies are still dropping.

Those retrenched are still not finding work fast enough.

Singapore Unemployment Rate by Age and Education

(Source: Singstat)

Singapore Job Vacancies have dropped

This means that those who lost their jobs will take longer to find another job.

(Source: Singstat)

You can only get tricked or cheated if you become greedy. If you can control

your emotions and exercise best judgement, you will be able to protect

yourself. In case you want to refinance your home loan, or get home loan,

you can come to us.

Contact us

Tel: 6100 – 0608       sms: 9782 – 8606

Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php

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1. Singapore home loan mortgage and refinance update june 2009