One of the most powerful sectors of Singapore's economy is its property market. Investment in property on the island has been massive over the last decade, as more businesses arrive and grow and the population reaches forever skyward. Yet, recently, many experts have foreseen a dip in in the city's property market and though it is still a fertile industry, there have been recent signs of slowing down.
So what can somebody who has invested in or plans to invest in property in Singapore expect this year?
2014 was one of the first years in recent memory where demand for property in Singapore dropped. Not only that, it dropped by a pretty substantial figure. The total sales of 7,500 for the year were 50% less than 2013. Despite this pretty major drop in demand, prices have managed to stay high, to the surprise of many pundits, lowering by about 3% throughout the year.
These trends are likely to continue into the next year, with too much supply and too little demand for the market to continue prospering at its previously muscular pace. Should we all be worrying about a crash. No, say experts.
Why it's not all bad news
One of the reasons Singapore is such an attractive economy to invest in is, while they allow for huge freedom for businesses to operate in the state, the government are not afraid to step in to prevent key markets from suffering if it will be to the detriment of the entire economy.
2015 being an election year, the government will be keen to ensure that even if the property market does continue to decrease, it will ‘cool off' as oppose to ‘crash' thanks to processes put in place to stop prices firing off to wildly in either direction.
When you consider how key property is to the average Singaporean's wealth, it is easy to see why the authorities would take such decisive action. 47% of all assets on the island are related to real estate, and the modern Singaporean is extremely unlikely to vote for a party who is not prepared to fight for their money.
So, what direction will this all go in? Well, the trends are not hard to follow. Undoubtedly the oversupply of houses will continue for many years in Singapore. 50,300 residential houses are planned to be built in 2015, 71,500 are planned for 2016 and 37,200 are planned for 2017. However, the total growth in population is estimated at a mere 75,000 per year. Given that, in all likelihood, the vast majority of those people will not be willing or able to live alone, the maths does not look good for the market. If, for example, you were estimating that, on average, 3 people will be sharing a home that puts the incremental demand for homes at just 25,000 every year – far less than the amount being built.
It is probably fair to say that prices will continue to go down, with some pundits citing as high as a 10% drop. The reason is simple: too many units will be left unsold and too many rooms will go unrented. However, certain parts of the market may thrive on shifts in demand. For example, large-scale luxury housing is almost certainly likely to take a hit, but smaller apartments will probably benefit.