SRX Property projects that private supply of new residences will increase 15.5% in 2016, which translates to 21,906 units available for occupancy. This represents three straight years of above average supply to hit the market.
At the same time, Cooling Measures have significantly dampened demand for private properties. At the end of 2015, landed property volume was down 79.1% and condominium buying was down 67.8% from their respective peaks in 2007.
“It’s a buyer’s market,” says PropNex CEO Mohamed Ismail Gafoor. “I define this type of market as when a buyer has an advantage in getting a fair or discounted price. Any tweaking of the Cooling Measures will shift sentiment in favour of the seller so buyers need to be alert that time is running out.”
The data certainly supports Mr. Ismail’s assessment. In 2015, days-on-the-market and price spreads were abnormally high at 4.5 months and 6%, respectively. As a general rule, the longer a home is on the market, the more it favours the buyer in being able to negotiate the price down, as reflected in the high price spread.
SRX Property’s Transaction-Over-X Value (T-O-X) shows that buyers have been trading at or below X-Value for much of 2015. This reflects the fact that buyers enjoy the upper hand in negotiating the price down.
For shrewd investors who have the financial means to hold for the long run, a buyer’s market represents an opportunity.
“People are concerned about asset depreciation. However, it has softened so much that downside is limited,” says Nicholas Mak, Executive Director of SLP, “If they wait any further, they can miss the boat.”
Eugene Lim, Key Executive Officer of ERA Realty Network, agrees. “Resale is more negotiable than new projects. So buyers can find some good deals,” says Mr. Lim. “People are not buying for quick returns but for the long run. History shows prime property will rebound.”
A buyer’s market favours those investors who are willing to do their homework and find opportunities amidst the low transaction volume.
Associate Professor Sing Tien Foo of National University of Singapore provides us with an overview of where to start.
“Orchard area is the traditional hotspot. We see a mixture of high quality and high density private housing develop- ments there and in the River Valley Road area. These areas are mature in terms of amenities and infrastructure and will hold their value in the long run.
“District 1 has picked up after the development of the Sail at Marina Bay,” says Mr Sing. “Downtown living is still evolving in Singapore. It may take some time to transform into a vibrant urban living like the New York City, where the convenience of work, life, and play is seamlessly integrated into one place. For investors who are prepared to bet on its success, choosing a right timing of entry into the market is important.”