Secrets Of The Singapore Property Market – That Almost No One Knows About (2019 Transcript)


Hey guys, first of all, I want to thank you so much for giving me your name and email address. It really means so much to me to have this trust from you right at the start. And so that I can send you weekly content that i hope would be very useful to you and you have me on your list forever. Um, well now what I want to share with you today is, is something that I actually shared with my client last weekend. He’s an Indonesian, he’s a referral, he’s actually looking to buy Singapore property. So I explained to him about the Singapore property market, which is what I’ll be sharing with you today. There’s no selling involved. I’m not going to ask you to sell any property at the end. So, uh, let’s get right into it.

Alright. So the Singapore property market, from a macro perspective, first of all, disclaimer that this is intended to be general background information may not necessarily be complete and it does not represent the views of my company. PropNex. It is my own views. And also I will not be selling you any property during this presentation. Alright. So, um, first thing I usually ask clients is to take a look at this Economist house price index. This actually tracks the period from 2013, I’m sorry, this actually tracks the period from 2013 to 2017.

Give you some context. This 2013 was when TDSR was implemented in Singapore. The total debt servicing ratio. So make a guess which colored line represents Singapore. Okay. Most of the time, based on, based on the many experiences people would guess this line or this line. Okay. However, the actual result might shock you. So Singapore is in fact the green line. So since 2013, while other countries such as Australia, New Zealand, Hong Kong, China, their property prices has increased, ours has actually fallen relative to the index in 2013 since our TDSR came, even Japan, Japan is actually this line. Japan, which has deflation for long, for many years. Their property index, actually rose during the same period. Okay. So then what most people will tell me, Oh, 2017, that was before the market turned. So then I bring it to my next slide. Okay. This one, this one, it actually extends the timeline up to 2018 up to 2019, sorry. So it includes the turn in the Singapore market from mid 2017 all the way to late 2018. So even what this chat tells you that even even given the turn in the market, our property values relative to the previous years in 2011 2013 is still very reasonable.

That’s why when you read, um, Global News, Global Housing Market News, if you notice, which are the countries that are very often written about housing bubble forming New Zealand, New Zealand is up there, 195 compared to, 100 back in 2011, uh, Hong Kong, 193, China, Australia. So these are the countries that, that a huge bubble has formed. That’s why you are reading reports about how prices are falling month after month, but yet in Singapore we don’t really get that. Okay, so why, so?.

This is a news report in July 5th, July 5th, 2018. Okay. MAS warns of euphoria puts Singapore property market on notice. If you recall what happened before that in mid 2017 there were a lot of enbloc sales. So land prices were going up very quickly. Then come July, our government actually issued this article. And do you know what happened the next day, the very next day our government entered with a cooling measure. Right. So this is actually the history of the cooling measures applied by our, by our government. Um, the red represents a cooling measure and the green represents an easing measure. Cooling measure cools the market and easing measure helps the market to move. So what you’ll notice is that our government actually controls our Singapore market greatly. If you go back and see our, um, our uh, property price index here. Okay. It took about four years from 2013 to 2017 for our, for our property price index to drop by 10% but only less than a year. For it to bounce back by about 10% and our government had to step in. That is how controlled our Singapore property market is by the government. Okay. Any point of time, look. Here again, here you reduced by about 10% and the moment it goes up by another by the 10% again, the cooling measure came in. Okay. It’s very highly controlled meaning to say that our entry prices are very safe because what the government wants actually is a stable market where prices go in-line gradually.

They do not want what we see now, which is the ups and downs as far as they can control it. They want something that goes slow and goes steady. To see this let me show you another chart, which is the correlation between our GDP and the property price index. Red is our GDP. The Blue Line is the property price index. Do you like to drink Bubble tea? It’s a bit of a joke here because every time a bubble is formed, it’s like drinking bubble tea. The price comes right down. Okay. When it strays too far away from the GDP, the property price index comes back down.

So what you can see if you show this chart to any stock market trader where the red line can be seen as the simple moving average (SMA). Now that you are below the market, is it a safe time to enter? Do you want to enter when you’re below the index or when you’re above the index? So as you can see, historically there hasn’t been very often where, where Singapore was below the GDP and when it’s above then there’s cause for concern because a bubble will form and the prices will come crashing down. As you see here in the early eighties late nineties with bubble, sorry, the late nineties of Asian financial crisis, the early two thousands dot-com bubble and 2008 the Lehman financial crisis. So Singapore’s government actually wants us once again to go up slowly, go up gradually at about 3 to 5% per annum.

So what we understand from this is that the Singapore market is in fact, you’re actually entering at a very safe entry point. And the only fear is that not that you will lose money is that you don’t make enough money. Because as we see from here, once the property price goes up, government will come in and press the price down, okay, so this is the first part. Second part would be to talk about an oversupply in the market. So what we see in the news is that the unsold private homes in the pipeline actually rose to 34,000 this was quite a recent article by PropertyGuru in February 20. Okay. Then we also see, um, Edgeprop come up with this map of the new launches in 2019 where there would be 60 new launches.

Sorry. In fact, 60 new launches. Yeah, so it’s 64 in fact, it’s written down here. Okay. So there are going to be a lot of new launch units coming onto the market in 2019. Okay. But here’s the more important question when we talk about the supply of housing it’s important to understand once again, who is in control. Last year in October, um, in, July, the first cooling measure came in the, additional, the increase in ABSD and the reduction in the loan to value. However, this was the more important one. In fact, that came in mid October, people didn’t realize that at the point in time, myself included, the impact of this measure, but now on hindsight it’s actually the right measure to cool the enbloc market. This has literally killed it because now developers cannot build as many units as before. Previously, let’s say for example, um, developers could build something that is a 1,500 per square feet, okay? And it costs $1 million for a Three Bedder, right?

Without the size limits. As the per square feet goes up, let’s see, 2000 per square feet, the size goes down. The developer’s still can squeeze three bedrooms inside, and they are still selling you at 1 million. This is what we are seeing in today’s market where the per square foot goes up, the developer builds smaller, you still get the same amount of bedrooms, and the price is more or less the same, sometimes even cheaper.

It’s no wonder that we actually see a lot of small units in the new developments. So because of this, the developers are really hit very hard by the cooling measures and they are not that able and willing to bid for land currently at the current state. All right. So who is actually in control. The government. When the government wants to cut housings supply, they not only, um, implement cooling measures which affect the private developers, they are also in control of GLS land sales. And it’s also reported that that in, uh, in first half of this year, 2019, they have cut the land sales by 20% in light of all the enblocs in pre 2018 and 2017. Okay. So a lot of the launches that we see in 2019, is not reflective actually of the future supply. Let me show you the charts.

In fact, they’ll give you a clearer picture of the overall view. This one’s very important. Uh, so bare with me while I explain it. Okay. So most of the units that will be launching in 2019 they will be completed in about 2022 to 2023, as you can see, the total 19.4 plus about 12,000 about 30 odd thousand, which is the same figure as published by property guru earlier. So is this an over supply? Okay. To answer that accurately, we actually have to look back to the period of 2014 to 2016, 2014 to 2017 in fact, where our property market was slow. So TDSR in 2013, And then our property market dropped by 10%. Remember the earliest slides? Okay. During this period there was actually an over supply in the market. This was the oversupply in the market where our average completion over the last 10 years, in fact, 14,200 during 2014, 2017, we had about 18,000 units on average up to 20,000.

So that was a reason why the market actually tanked during that period. However, if you actually do your due diligence and look carefully as Credit Suisse has done in this report, and I’m, and I’m sharing it with you, uh, you look at the scheduled completions from 2019 to 2023 onwards. In fact, it’s only the year of 2022 where the completions are high, but even then, it is still less than the average figures of 2014 2015 and 2016. What does that mean? In fact, the average net demand is what we should look at. The average net demand is 11,831 over the last 10 years here.

So when you look at these graphs, in fact, our supply isn’t that a lot because if you average it out, average the total, which is a 19,000 plus 12,000 plus another 12,000 plus a 4,000 and another 9,000 here, the average comes out to be about 11 or 12,000 thereabouts. This is why, in fact, I would say that there’s not much oversupply in the market you see it right now due to the launches. But give it one year, give it one year, and then you will see in 2020, there’s actually not much completions in the market. And then there will not be much new launches due to the lack of land sales in 2019. So just, in my last slide I want to summarize to you the property market in Singapore. Okay. First it is good value.

And it’s a safe entry. You’re buying at a point where you are so safe because you are far away from the GDP line. In terms of characteristics, characteristics is government control. So the fear isn’t so much that you will lose money on a property purchase is that you don’t make enough money. So, uh, I was chatting with my, uh, with, as I said, the Indonesian client for him because his ABSD is 20%, it would eat into a lot of his capital gains or rental gains or his rental income. So his main gain is capital preservation. Here’s a little bonus that in Singapore market, another reason why it’s so attractive is because of our SGD currency. Because Singapore is a country with no natural resources, we actually, our government has a stance on it is monetary policy where our SGD is very strong and has always been appreciating historically up against the other countries. That’s because we actually make a lot of trades with overseas countries and if we don’t control our SGD currency, inflation would hit our society very hard. So another reason for him specifically is the hedge against currency risk.

Right, so that’s the end of my presentation today. I hope you have found some value in it. If you have any questions, same thing, drop me a message, let me know your question. I’ll do my best to answer it. You can also let me know what topics you want me to cover in future. I’ll see you soon.


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