January - a month filled with new beginnings, fresh starts, and insights on Singapore's real estate scene. In a closed-door appreciation event I hosted for my clients, that is.
We dove headfirst into the latest forecasts for Singapore's commercial, industrial, residential, and new launch segments, leaving no stone unturned. (here's a nifty little recap for those who missed it).
Of course, no gathering of minds is complete without a little Q&A action, where we tackled questions about external factors that may affect real estate portfolios. We've distilled them into short and snappy bites just for you.
1. Will China’s reopening impact me?
Despite the challenges posed by COVID-19, Chinese buyers have proven to be a force to be reckoned with, even making purchases without physically being in Singapore. With this in mind, I foresee no real impact on the number of buyers, as those after smaller ticket items are typically drawn by our excellent education system, while those after big-ticket items prioritize securing citizenship before setting up shop over here.
While the needle in the buying market is unlikely to budget, the rental market may enjoy a short-term boom as they make short trips to check out what Singapore has to offer. There may be an influx of Chinese tenants in the serviced apartment segment in particular, though they will likely be price takers.
2. Should I buy property in the region?
I'm all for exploring opportunities beyond Singapore when our local policies aren't in our favor, and buying property abroad can be tempting in face of soaring property prices at home. Have you seen the sea view that S$500,000 can get you in Penang?
But let's be real. Buying property in the region you'll be exposing yourself to a whole new socio-political environment, which can be a red flag if you have reservations about the country's government. And while you may reap significant gains in the local currency, forex fluctuations can leave you feeling like you've been shortchanged. After all, we've seen currencies in neighboring countries fall by as much as 30%. Just look at the Thai Baht during the Asian currency crisis. .Then there's the issue of bailing out when the currency tanks, since property isn't an asset you buy and sell over a phone call. In fact, by the time you start reacting to the news, it's probably already too late. That being said, there are certain circumstances in which buying property overseas may make sense - for instance, if you plan on actually using the property, or if you're comfortable with the exposure to the socio-political environment and currency fluctuations. Just be prepared for the added strain of managing a property from afar.
And let's not forget the importance of having a trustworthy team on the ground in the home country. Personally, I'm lucky to have a reliable agent for my properties in Thailand, but it's worth noting that work cultures can vary . Some realtors in Singapore will take your call at 3am, but getting hold of someone at 3pm can be a big ask in some countries.
3. Will there be rich pickings in 2023 as people struggle with their loans?
While 2022 might have been the year to strike gold, there may still be some opportunities in 2023. For starters, down-graders looking to cash their private homes in for an HDB flat now have to contend with the 15-month wait-out period. Since the clock starts ticking when the property on hand goes out of the window, they may be motivated to take the heat and "sell first, think later". If enough down-graders follow suit, there may be attractive opportunities for the rest of us.
But don't expect these to show up in the property price index. Despite the challenges of the last two years, property prices have remained resilient, moving in tandem with inflation. Unless a black swan event comes along, it's unlikely that the market will cool off too much.
4. Could the authorities amend the measures this year?
It's hard to say for sure, but let's take a closer look at what's been happening.
Recently, the interest rate "stress test" has gone up from 3.5% to 4%, which means the government is testing to see if people can still pay their loans in the face of rising interest rates. My hunch is that the "stress test" may rise even higher, to 4.5%, if interest rates continue to increase. But that's not all. Due to changes in loan eligibility, people may find themselves with smaller budgets, leaving big-ticket ones on the shelf. As for the private property market, it seems to be doing well, with sales continuing to move even with the new stress test. As such, the government may not be too focused on making changes to that sector. However, public housing is a different story, with million dollar flats making headlines every other month. So, who knows what the government has in store? It's all a bit of a "black box" at the moment. Until then, if you have further questions, reach out to me (Harvey Chia) at 9199 9141
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