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Are private homes getting out of reach?

Posted on 19 Sep 2009 | 1 comment

OF ALL the maxims that Singaporeans hold to be true, a key one is that condominium units here have become less affordable over the years, forcing their children and grandchildren to inhabit smaller and smaller spaces, farther and farther away in the suburbs.

So, when a Straits Times report last month cited an economist and a property consultant stating separately that the affordability of private homes has increased since the property boom in 1996, some readers were up in arms.

The duo used different formulas but their conclusions were the same: Singaporeans’ wealth had grown more than private home prices in the last decade, making homes more ‘affordable’ – at least in the ways they each defined the term.

For many readers, the conclusion was inexplicable and unacceptable.

The property market had breached unprecedented levels in 2007, and it hardly took a breather during the recession before powering ahead again this year. Incomes, they felt, could not possibly have risen more quickly than home prices.

Mr Ng Kok Lim, a polytechnic academic staff member, was among those who wrote to The Straits Times’ Forum page disagreeing with the conclusion. Continue reading →

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Posted in Property Market / Real Estate, Property Price

Tagged Property Prices, Singapore Property

Time to tread with care

Posted on 19 Sep 2009 | Comments Off

There is a high possibility of further cooling measures if residential prices continue to escalate ahead of economic fundamentals

THE government this week announced several tightening measures for the property market. This is in response to increasing worry that the local property market is getting a a little frothy. In his previous speeches, National Development Minister Mah Bow Tan has explained therole of government in the property market.

In his speech in Nov 26, 2008, Mr Mah highlighted the need for property prices to move in tandem with underlying economic growth. He also said that when housing prices are going up, speculation and fear of missing the boat can cause home buyers to pay more for their property than is justified based on economic fundamentals and this can lead to bubbles being formed. Time and again, the government has acted to cool down the property market when it became too hot. The recent measures were described by most analysts as being ‘measured’. They shouldn’t dampened the sentiment too much. But it did show that the government is prepared to impose cooling measures.

So this week, I’ve decided to do an update on the property market, looking at the latest available numbers. Last year in this column, I plotted a chart which showed how the Singapore’s gross domestic product (GDP), the URA private property price index and the Straits Times Index moved since 1975.

The chart showed that up till 1993, the stock and property market more or less tracked the growth of the economy. Then the property market broke away in 1994, 1995 and 1996. In hindsight, that huge deviation of property prices from GDP has proved to be a bubble.

That bubble was pricked by the government’s anti-speculative measures, and later by the Asian Financial Crisis. Property prices then corrected severely and closed the gap with the growth of the domestic economy. In 2007, property prices sprinted ahead again. The correction came soon after in 2008, but in the last couple of quarters, prices have risen again. But as per URA’s second quarter data, private property prices don’t seem to have strayed too far from the economic fundamentals. How about affordability? Here, the numbers look reasonable as well. I take the average income of the 71st to 80th percentile households in Singapore. According to the Department of Statistics, the average monthly income for this group was $8,010 in 2006, $8,730 in 2007 and $9,720 in 2008. I then compare these to the median price of condominiums in that three years. Continue reading →