The MAS noted that although Asia has bounced back from the financial crisis faster than expected, the global economic outlook remains uncertain.

This is because the nascent recovery in the world’s biggest economies – the United States, Japan and the European Union – has largely been dependent on government stimulus.

There is a risk that once these stimulus policies are withdrawn, their recoveries will take a hit, thus affecting Asian economies, especially those that are export-dependent such as Singapore.

If economic recovery stalls, corporate earnings may come under renewed strain and corporate refinancing may become more difficult. MAS added that unemployment could also rise if the economy slows again.

Despite such uncertainties in the global outlook, Singapore’s property market has taken on its own dynamic. Private home prices rose almost 16 per cent in the third quarter – the highest quarterly increase in almost three decades.

This has led MAS to warn that a speculative bubble could form.

MAS said although the government has already introduced several measures in September to temper the exuberance in the market and pre-empt a bubble, more measures might be needed.

But the nature and timing of such measures would have to be balanced against the still uncertain path of economic recovery.

On a brighter note, MAS said local banks and insurers have remained resilient through the crisis, maintaining high capital and liquidity ratios. It added that local banks’ earnings have dipped but remained above market expectations.

This, together with successful capital-raising efforts during the crisis, should enable the local banks to absorb further credit losses in the coming quarters.

Source : Channel NewsAsia – 9 Nov 2009

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Private-housing prices rebounded sharply by 15.8 per cent, easily the highest quarterly rise in more than 25 years. This is aggravated by the decline of housing rentals. Prices dropped by 2.2 per cent despite the third quarter traditionally being the best in terms of number of leases closed, as this is when many expatriates return from their holidays and sign new rental contracts.

Although the overall housing rental trend is down, rentals in some areas have improved and recorded increases in August and September. These increases could partly be due to the large number of expatriates signing new leases in the third quarter. Overseas managerial staff from the integrated resorts would also have signed on during this period.

Rents will go up for some developments due to competition. There are also signs that some tenants are moving to smaller units. This may also lead to rises in some unit types but declines for others.

In the third quarter, 921 units were added to the total number of vacant housing units or a growth of 6.6 per cent, as 3,666 units were completed during the quarter – the highest quarterly figure in more than a decade. The last time the market saw any significant growth was in the first quarter of last year, when the number of vacant units grew by 1,728 units or 13.2 per cent.

The number of units completing in the final quarter and next year may not be big – 1,805 for the fourth quarter and 5,737 for the whole of 2010. But the pressure resumes, with 11,667 in 2011 and 12,991 in 2012.

Owner occupiers or investors?

The Singapore private-housing market has traditionally been anchored by owner-occupier purchases, giving stability to prices.

But in 2007 and 2009, the proportion of investors rose significantly. There is no formal information on the actual percentage of investors but a small sample of about 33 cases show investor-purchases at 87.8 per cent of the total, showing an increased downward pressure on housing rentals in the future.

Judging from land prices, which have increased by more than 30 per cent based on the winning bids from five triggered Government sites, housing prices can be expected to rise.

The latest announcement that the Government intends to launch eight housing sites from the confirmed list in the first four months of next year is timely as it helps to increase supply. With ample liquidity and the low cost of funds in the market, it will be awhile before prices begin to drop.

For those still contemplating investing in the property market, recognise the activity for what it is – a high risk, high gain play. It is never a low-risk, high-gain activity.

The writer is the head of research and consultancy at Chesterton Suntec International. The opinions expressed here are his own.

Source : Today – 7 Nov 2009

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