Tuesday, October 1, 2013

The property market in perspective…

I was at my long time lawyers place yesterday. They have acted for me in all my transactions until the professional liability insurance could not support us anymore. However, we have become very good friends in the process. They were all lamenting the lack of deals in the market. The banks are taking forever to process deals and many deals are being aborted as financing becomes scarce. As I had predicted in earlier posts, this round of new government measures WILL BE EFFECTIVE.

There is still activity in the market as Chinese money is still hunting for investments. I suspect the recent crackdown on corruption in China has something to do with this. Chinese officials and their cronies are preparing for ‘what if’ situations. The structures they have set up looks a little dodgy and they are targeting mainly commercial property and there is no ABSD that increases the price of their transactions for them. Do not underestimate the amount of money flowing in from this source as I estimate the amount to be staggering.

What is the bottom line then? Residential will be very muted especially if that asset class’ demand is domestically driven. Why? The drying up of financing will impact local Singaporeans’ ability to buy. This is because they are very dependent on bank loans. Think of landed properties where only Singaporeans and selected PRs are allowed to participate.  

I am also grim for HDBs as many workers are being sent back as the government is serious about winning the popular vote and cutting the quotas of workers. Those with employment passes are also being targeted as the minimum salary level has increased and the newly implemented job bank will require certain regulations to be passed before companies are able to hire them. The strong rental for HDBs has been propping up the upgraders market for mass market homes. I have been reiterating this for quite some time and I hope you do keep tab.

Commercial properties will still be selectively strong as foreigners are able to pay full cash! Yup, you did not hear me wrong, no financing. I certainly hope that the international economy do not collapse as any shrinkage of the economy will have everyone heading for the exit with no one to pick up the slack.

Till the next entry, take care and God Bless!

Your Friend,

Andy Ong