The property market in Singapore has always been a topic of great interest and discussion. Aspiring homeowners and investors often ponder about the ideal timing to enter this dynamic market. However, the notion of a “right time” to enter the property market in Singapore is a fallacy. Are you planning to wait for the “right time” to buy a property? If so, when exactly is the “right time”? When property prices are low?
This article will delve into various factors that debunk the idea of a perfect timing, highlighting the ever-changing nature of the real estate market and the complexities involved.
Property prices in Singapore has consistently been rising even with the pandemic for the past three years. Latest figures released by The Urban Redevelopment Authority (URA) showed the real estate statistics for 1st Quarter 2023. Prices of private residential properties increased by 3.3% in 1st Quarter 2023, compared with the 0.4% increase in the previous quarter.
Private Residential Market at a glance:
Property Price Index of private residential properties:
“Prices of non-landed properties in Core Central Region (CCR) increased by 0.8% in 1st Quarter 2023, compared with the 0.7% increase in the previous quarter. Prices of non-landed properties in Rest of Central Region (RCR) increased by 4.4%, compared with the 3.1% increase in the previous quarter. Prices of non-landed properties in Outside Central Region (OCR) increased by 1.9%, compared with the 2.6% decrease in the previous quarter.” – URA
“Rentals of private residential properties increased by 7.2% in 1st Quarter 2023, a marginal moderation from the 7.4% increase in the previous quarter. ” – URA
Rental Index of private residential properties:
“Rentals of non-landed properties in CCR saw an increase of 6.4% in 1st Quarter 2023, compared with the 7.3% increase in the previous quarter. Similarly, rentals in RCR increased by 6.2%, compared with the 7.3% increase in the previous quarter. Rentals in OCR increased by 6.1%, compared with the 8.2% increase in the previous quarter.” – URA
Evidently, based on the charts above, we can see that property prices have been rising steadily since 2018. The surge in property prices started during the pandemic.
Some reasons why property prices are heading north?
1. Construction Costs
Construction cost has risen ever since the start of the pandemic and has even reached record-high levels in 2022. The construction sector is faced with such an unprecedented circumstance as they grapple with higher material costs, manpower crunch, and inflation. These circumstances have inevitably raised the cost of construction by at least 30% since 2019.
The disruption to the supply chain caused by the pandemic took a toll on the sector as those supply chains are now playing catch up to meet the demands by clearing the outstanding backlog. To make matters worse, the Russia-Ukraine conflict caused prices of raw materials to soar, along with a sharp rise in global crude prices. Crude oil is essential for the construction sector as areas like shipping and the production of construction materials heavily rely on crude oil.
2. Land Costs
The Government Land Sale (GLS) programme happens in March and September every year, the government will put out a list of land parcels that are available for development projects that are for development purposes. Developers who are interested in acquiring the land parcels will have to submit their bid through an open tender.
The land parcels go through a land-bidding war between developers vying for their chance to secure the space to build their new projects. The eventual price of a project could also be determined by the price developers are able to get the land at. Land parcels that are popular would receive more bids and thus driving up the prices.
As you can observe from the three charts below, the commonality between them is that land prices are on a rise and the increase in the land price is then passed on to future homebuyers.
So, back to the question. Is there a “right time” to enter the property market?
Market Cycles and Uncertainty:
The property market in Singapore, like any other market, operates in cycles, which consist of periods of growth, stability, and correction. These cycles are influenced by a complex interplay and overlapping of factors such as global economic trends, supply and demand, changing government policies and market dynamics. Attempting to time the market by predicting these cycles is an extremely challenging task, as it requires accurate foresight and understanding of the property cycle. Even experts find it challenging to predict the peaks and troughs of the property market with precision. Moreover, market conditions can change unexpectedly due to various external factors (most recent one being the pandemic), rendering any attempt to time the market futile.
Economic Factors and External Influences:
Economic factors play a significant role in shaping the property market. Factors like interest rates (rates in Singapore are influenced by the US Fed Rate), inflation, and employment levels directly impact housing affordability and buyer sentiment. However, these economic indicators are highly volatile and subject to constant change. Attempting to wait for the “perfect” economic conditions to enter the property market in Singapore is an exercise in futility, as future economic developments are unpredictable.
Furthermore, external influences such as geopolitical events and global economic shocks can create unexpected disruptions in the property market. These events create uncertainty and can lead to sudden shifts in market dynamics. Therefore, relying and waiting for the “right time” based on economic factors and external influences is impractical, as one cannot accurately anticipate these variables.
Changing Government Policies and Regulations:
The Singapore government plays an active role in the property market through various policies and regulations. Such as, Cooling measures, stamp duties, and loan restrictions (TDSR, MSR) are implemented to ensure a stable and sustainable property market. These policies are designed to prevent excessive speculation, control price inflation, and ensure housing affordability for all Singaporeans.
However, government policies are subject to change based on evolving market conditions, supply and demand and government objectives. Waiting for the “right time” to enter the property market based on government policies may lead to missed opportunities. Policy adjustments can impact property prices and demand, making it difficult to time the market accurately. Investors and homebuyers should consider the current policies and regulations but should not solely rely on them to determine the right time to enter the market.
Supply and Demand Dynamics:
Supply and demand dynamics are fundamental drivers of the property market. However, these factors are influenced by a myriad of variables, making it difficult to accurately predict market conditions. Supply can be affected by factors such as land availability, construction costs, and government land sales. On the other hand, demand is influenced by factors like housing needs, population growth and changing buyer preferences.
Attempting to time the market based on supply and demand dynamics is challenging because these factors can fluctuate unexpectedly. The property market can experience sudden shifts due to changes in economic conditions, government initiatives, or market sentiment. Waiting for a perceived oversupply or undersupply of properties may lead to missed opportunities or entering the market at a less advantageous time. Instead, investors and homebuyers should analyze the long-term trends along with their needs and consider the overall supply-demand balance when making decisions.
Long-Term Investment Perspective:
When considering property investment, it is essential to adopt a long-term perspective. The property market in Singapore has generally demonstrated resilience and shown appreciation over the years despite global economic events such as the financial crisis and the global pandemic. Factors such as population growth, limited land supply, demand for housing and ongoing urban development contribute to the long-term value of properties.
Instead of trying to time the market and wait for the “right time”, investors should focus on the potential returns and the suitability of the property for their investment goals. By taking the long-term approach, individuals can benefit from the gradual appreciation of property values and rental income over time in Singapore’s resilient property market.
The property market in Singapore is a complex and ever-changing environment influenced by numerous factors. The notion of a “right time” to enter the property market in Singapore is an elusive concept. Attempting to time the market based on market cycles, global economic conditions, changing government policies, supply and demand dynamics, or external influences is a futile exercise. To top that off, inflation creeping up in the background.
Instead, aspiring homeowners and investors should adopt a long-term perspective and approach, consider their personal circumstances, and evaluate the potential returns of property investment. By focusing on these factors, individuals can make informed decisions that align with their goals and financial capabilities.
For a tailored advice to your housing needs, consult a real estate professional to help guide you on your property journey.
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