I read with interest about Finance Minster Tharman Shanmugaratnam take on a possible market crash in Singapore. He’s quite sure it will not happen. He gave very sound reasons to back him up..but he’s only 50% correct..It can also turn the other way around. Let’s examine what has happened so far.
With an onslaught of cooling measures, market has almost grinded to a halt. With a slew of houses still not sold,in the private property market,more in the upper market especially, developers are getting nervous. Will this be the only reason why a market can crash?
Let’s examine the majority market here, which is the 80-odd percent of public HDB houses. Are they moving? In some estates like Bukit Panjang, Choa Chu Kang, Sembawang, there’s this big challenge of selling..particularly because there are more homes for sales then there are buyers. Does that mean there are no buyers in the market. In fact there are many buyers, but either their PR status or the debt ratio prevents them from buying.
There are 2 types of sellers in the market. One who’s desperate to sell and one is upgrading or downgrading. If there are no buyers, or rather limited buyers in the market, then naturally, prices will have to drop to meet the sale. Buyers know this, so it will be a tug-of-war of prices, to see who will fall first. Will market crash because of this? maybe not.
What if interest rates increase? The likelihood of people then losing their homes will be more, and that’s when market can crash. It will be the biggest factor in causing a market crash.
Inflation that goes up faster then the value of houses and salaries will have an effect on the economy. Companies won’t be able to keep the competitive edge, that once was a determining factor for companies setting up in Singapore. Even as we speak, companies who can find a cheaper alternative in Malaysia or Philippines, will move. This will have a direct effect on the real estate scene. Homes won’t be rented out, and if takes too long to find a tenant, will go into foreclosures, if rent is not met.
This can crash the market.
IN what sense the Finance minster say with confidence that it WILL NOT crash, is something I wonder. Are companies moving out, or letting go people? Are there fewer tenants out there?Are there lots of homes still not sold? Is inflation on the higher side now? Is the real estate market dull now?
I can only hope that the “drivers” are not asleep, as what was done 10 years ago, with the influx of immigrants and not a single house built. Now that HDB has more or less met the demand, what now? How does one “invigorate” the market again? You can wake a dying bull up, but you cannot do the same with a dead cow. It will then be a little too late.