AN INSIGHT INTO THE SINGAPORE PROPERTY SURGE AND DECLINE

AN INSIGHT INTO THE SINGAPORE PROPERTY SURGE AND DECLINE
19 April 2014
There have been a lot of talks over the Singapore property market in the past few years. Almost everyone was talking about investing in property and rapidly escalating prices. A friend who has no interest in the property market told me, “The market is going to crash, an abrupt rise always leads to an abrupt fall”, she said this at the time that the market was booming.

Talks of property soon entered board rooms, dining tables and social networking sites. Everyone had only one topic and that was property. I definitely felt like a star since I was dealing in Properties and that’s my specialization.
People started discussing about the property bubble in the USA and how the market had crashed but yet gradually the property prices kept rising in our heartland. Some people were complaining but many were happy. The buying activity increased and the Real estate companies were happy with their cash registers ringing.

The people who didn’t have the resources or means or were scared to make a move started criticizing the Government.
It’s difficult to predict a real estate bubble, because it reflects people’s sentiments and that’s something which is totally difficult to predict.  

By mid-2009 it became apparent that we are going towards an economic crisis and if steps were not taken to avert this, we would be in a disastrous situation too.  The cooling measures thus started.

The Government tried to curb speculation in property, but the temptation of low interest rates and easy access to home loans instead pushed people to over-borrow and speculative buying.  I have seen people buying and selling the property once they got the possession and making $50k cash in the bargain. Mr. D.D. who is a banker and regularly speculates in the stock market was telling me, “It’s safer to invest in property and I will be assured of profits, this is safe speculation”. He was thinking of buying a second private property, his third property in Singapore.
The temptations were too strong. Everybody wanted to jump into the bandwagon. Even after the Government imposed curbs on speculations, people were snapping up offers at the last minute, before the curbs took effect. Little did they realize that they could be hit hard later trying to service large loans for a second or third property.

This kind of runaway mood usually calls for caution as we were headed towards “inflation”.
We already had a lesson to learn from the subprime mortgage crisis in the United States which was a major cause for the 2008 financial crisis. The price of irresponsible economic behavior, in both the housing and credit markets led to the collapse of the housing bubble which in turn precipitated a national crisis of defaults and foreclosures there. This led to the worst recession in the USA since the Great Depression.

The Singapore government did not want to head towards a similar situation and introduced some cooling measures since 2010, aimed at preventing a bubble in the country's housing market. These measures were imperative mainly to stop the rising home prices which were not proportional to the incomes here.
Yet, people were unstoppable due to a “follow the crowd” attitude. They were insusceptible to the cooling measures due to the lure from banks offering low interest rates and the potential that their investment would be definitely lucrative due to the limited land available in our red dot.

This led to a spate of further cooling measures.
But since the first quarter of 2013, the market as a whole did start to see some stabilization as a part of repeated cooling measures and escalated property prices discouraging people to buy.

The finance Minister Tharman Shanmugaratnam told Reuters. "We're not ready yet to lift our measures or ease up on our measures so we're watching the market and have to make judgments without announcing our policy moves well in advance. We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices down the road."
He further said that, “This package of measures is significant. We think it will cool the market. It will help Singaporean couples who are buying their first home, that's our first objective. And second, it will help all property owners because we have to correct this trend of price increases. We've got to put in these road barriers now to slow the market and avoid a crash later on.
These statements were very profound and the measures were very effective.

The effects of the cooling measures can now be seen as the property market which was abuzz with activity has now become relatively quiet.

I strongly believe that these market cooling measures shouldn’t be permanent. The Government must study the patterns in the market and make amendments if required to sustain healthy buying sentiments and ensuring a continued confidence in the economy.