3 indications that show just how bad the Singapore residential property market is

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In Jan 2014, I wrote about why this year could be turbulent for property market stakeholders. In the recent weeks, there were some reports on how quiet the high-end property market in Singapore is. A casual observer may think that this is just limited to the high-end sector; in reality, the market malaise is probably more wide spread than what many people realise.

For those who are wondering just how bad the market is, here are 3 indicators to shed some light on the health of the Singapore residential property sector.

Indicator 1: The Property Price Index is on a downward trend

If you have been following the property market news, you would have read that the URA private property price index (PPPI) has been on a downward trend. But exactly how much has it dropped by and for how long?

Based on Figure 1, it can be seen that prices in the private property market, as a whole, have been dropping for 9 months (i.e. 3 quarters) and the total drop has been about 3%. While some may feel that a drop of 3% is not much, URA PPPI is only one indicator. To have a more complete picture, we should look at how much transaction volume has dropped by.

Figure 1: URA PPPI chart (2013Q1 to 2014Q2)

DurationURA PPPI% Change
2013Q1213.2
2013Q2215.41.0%
2013Q3216.30.4%
2013Q4214.3-0.9%
2014Q1211.6-1.3%
2014Q2209.4-1.0%

Source: URA, Ascendant Assets Pte Ltd

Indicator 2: Significant drop in transaction volume

To give readers a sense of the transaction volume, a chart comparing the monthly changes between 2013 and 2014 is shown in Figure 2. Graphically, it can be seen that in some months, transaction volume in 2014 is less than half what it was for the same month a year ago.

Figure 2: Transaction volume comparison

Source: URA, Ascendant Assets Pte Ltd

Collectively, there were a total of 19,531 private property transactions from Jan 2013 to Aug 2013. In comparison, there were only 8,532 for the same period in 2014, which works out to be a drop of more then 56%.

Indication 3: Number of unsold units is increasing

Some readers may argue that low transaction volume may not be representative of a lacklustre market, as there may not be that many units on sale to begin with. However, when we look at the number of unsold units in the market, it is observed to be increasing.

Based on URA’s data, it can be seen that the number of private residential units (including EC) under construction that were launched and remain unsold is on an upward trend (see Figure 3). As at 2014Q2, there were more than 6,300 units still left unsold. With more new developments coming on line in the next few quarters, this figure looks set to increase.

Figure 3:Private Residential and Executive Condominium Units Under Construction with Pre-requisites for Sale and are Launched but Unsold

Source: URA, Ascendant Assets Pte Ltd

Conclusion

In conclusion, we are still in early days and the lacklustre market is expected to last for some time. Hence you may want to maintain a healthy dose of scepticism whenever you hear anyone who tries to present the property market in a promising light.

Even the Minister for National Development, Mr Khaw Boon Wan also recently commented that the property cooling measures are here to stay, hence it is quite unlikely that the property market will pick up in the near term.

For those who are looking to buy a property, perhaps you will start to see some good deals coming on line in the next few months. As for those who have over invested, you should be mentally prepared that the situation will only get worse before it gets better. And when we will reach the end of the tunnel is anyone’s guess.

 

TISG thanks CoAssets for this article which was first published here.

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