We want to talk about the property market in 2017 and especially if this is the year to start looking property investments again.
Ever since the introduction of Total Debt Servicing Ratio (TDSR) back in 2014, the thought of investing properties in Singapore, for most of us, vanished. Comparing this to the year 2010, there was a huge shift in the market sentiment. Between 2010 to the first half of 2013, the buying sentiment was intense, especially given the opportunity low interest rates provides. The property market in Singapore has now gone the what the analysts called “soft-landing especially in private residential segment in the last 36 months.
With the Urban Redevelopment Authority (URA) recent release of the pricing statistics for the private residential segment, we have noticed the prices of these private homes were lower on average (for the year 2016) compared to the peak back in Q3 2013 by over 11 percent. With this, we are expecting the stability on the prices of the these private residential properties this year. In fact, you should see less incentives (or you might call it, sweetener) being given by developers unless the project is close to its deadline on ABSD or for the current owners who lack the financial power to hold on.
What kind of properties to expect.
At Moneytalk, we expect private residential units that less than 600 square foot to make the headlines this year. In fact, these units have been very popular with the buyers over the last 5 years. However, in the market today, we are seeing intense pressure in their rental and resale value. On the resale aspect, it has been on a downward trend recently with most owners of such units feeling the pinch because they have not been able to rent it out (without losses) or able to sell it because of the weak demand. On the rental aspect, these so-called “shoe-box” residential homes, usually sized between 500 to 600 square foot, more than often ask for rents similar to the typical 4-bedroom HDB Apartments.
These so called shoe-box in the suburbs are facing even higher pressure because tenants who usually goes to the suburb are in there for the space and typically would not pay to lease a shoe box apartment. Needless to say, these are the type of units that has seen significant price dip compared to the rest of the segment.
Given the price pressure faced by these owners now, we think that there is an opportunity ahead. For home investors, it is an absolute must-see (especially in the resale market) because we expect to see more owners willing to negotiate and perhaps lower their selling prices. To start off, you can first look out for upcoming auctions on these properties or find showflats of new condominium launches that have been in the market for awhile – usually these have units remaining that are expected to obtain temporary occupation permit (TOP) in 2017 or 2018.