27/11/2014

SG Property – From Past To Present

SG PropertySingapore has risen to become one of the most powerful economies in the world, and this is partially because of the mixed free market and government controlled environment of the Singapore economy. Singapore enjoys good governance and excellent governmental procedures to nurture and grow the booming economy. Because of such excellent practices, Singapore’s economy is considered a model economy that reflects balance and success.

The economy is not the only thing Singapore’s government is overlooking; the sg property market has experienced several rise and fall cycles since the 1970s, and only a year ago it wss in a critical state which necessitated government intervention.

From the beginning of the cycle in 2009, property prices in Singapore have been steadily rising until reaching a booming state in 2013 with prices increasing more than 60% from their 2009 averages. This rapidly accelerating boom threatened to create a bubble in the sg property market that would eventually burst and cause a severe decline which will greatly damage the real estate market as well as the whole Singapore economy.

As a direct intervention to counter this rising threat, several cooling measures were introduced to the property market in Singapore by the government to curb the massive boom in the market and control rapidly rising prices. These measures have been met with mixed reactions from buyers and developers.

The Singapore government is attempting to achieve a delicate balance with these measures; cooling measures are necessary to prevent a disastrous decline in the singapore property market, but too many measures could backfire into their own man made crash as well! The Singapore government understands that these cooling measures may not be enough to completely avert a potential crash in the few years ahead, but enough to steer clear of inducing a sure one with their actions.

The gradual introduction of these cooling measures have effectively transitioned the Singapore real estate market from booming to decline in a more controlled manner and will serve as a basis for more regulations that will focus on preventing a real estate market crash and a quick transition to healthy market growth.

Cooling measures enforced on the sg property market result in tougher requirements and limits for real estate financing, higher interest rates, more restrictions and taxes on foreign ownership, higher stamp duties for buyers and sellers and more HBD restrictions.

Although these cooling measures have started to show their intended positive effects, they have also shown to have some undesirable side effects. These side effects are causing many voices to demand changes to these cooling measures.

One of the major side effects of cooling measures is the extreme decline in property resale transactions this year. Percentage of property resale is reminiscent of crisis period such as the Asian and global financial crises!

Such stagnation in the real estate market is bad news; it effectively hampers the growth of the whole market and creates very slow uptake rates, which means properties stay on sale for longer and the inability of sellers to find buyers. This slowdown in growth also threatens to create a state of insufficient housing in the future if population growth continues at its current pace.

New restrictions on property financing will present more difficulties to families searching for a home, especially a middle class family. Focus will shift to smaller and more affordable homes, which be a direct challenge facing the increase of living standards. Because of the increased difficulty of affording more living space, families will be forced to limit their size and eventually take a toll on Singapore’s needed population growth.

Another consequence for the declining market state is that property investors no longer consider Singapore as their prime location and shifted their attention overseas to other real estate markets such as Malaysia.

As a result of the large number of unintended side effects, major real estate developers are urging the government to review these cooling measures and introduce amendments that should address these side effects. They expressed their concern about Singapore’s status as a business hub and investment capital in the near future. This opinion is shared by many entities in the real estate business. The government remains firm on its stance regarding the cooling measures and explains that reversing their effects can have an even more catastrophic effect than leaving them as they are.


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