Tuesday, January 15, 2013

As predicted in November!!! More cooling measures…

Hi guys! In the last gathering at the Spring auditorium, I shared with you that more cooling measures is not a matter of if but rather when. Well, the government announced its seventh round of cooling measures. I know it is rather obvious this time around but let me gloat a bit occasionally. This time around, the measures are more draconian but many analysts are shrugging them off. I chided one of the bank’s property analysts for predicting a 15 to 20% decline in mass market home prices when the government put in its 4th round. We are in a new world order and things are a little different. Singapore is in great shape economically and our unemployment numbers are negligible.

However, this time round, I do see this round of measure do taking effect because of one crucial factor. Singaporeans will find it very difficult to finance a second property given the low loan quantum and they will also have to pay rather punitive ABSD. Prices will not come down by that much as holding power is there given the low holding costs, courtesy of low interest rates. However, I expect volumes will be impacted. When the full force of the record supply of mass market properties hit the market in 2014, things will get more interesting.

In the meantime, for those who are holding premium property will be hit most. This is because the cooling measures are structured to remove that element of demand from foreigners. They are also the pillar supporting your prime property. Given the more aggressive downsizing of international banks and other firms, less people will be interested in buying and even the rental market will be definitely impacted. And the bottom-line? We are in an era of margin compression given the lower rental and higher prices. Watch any signs of interest rate movement. Once it moves north, be careful. In fact, be very careful.

Your Friend,
Andy Ong