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My first post for 2023, happy new year everyone! Many assume a substantial 30-40% crash for Singapore property market will likely be disappointed. The reason for this is because, many use past examples like during the Asian financial crisis and the Lehman crisis to compare.
Those eras were very different from now. During those days there were no tdsr or ltv. Buyers during that time are able to take on high leverage and buy many properties at once by just paying a small down payment for each unit they bought. There was no seller stamp duty or absd to discourage speculation. They can contra and off load anytime they wish and deferred payment was encouraged.
This means when prices dropped due to a dropped in demand during those era, margin calls and force selling contributed a very massive impact on the market due to the uncapped leveraging and ease of disposing with no penalty.
The amount of cooling measures now have forced buyers to only spend a portion of their earned income on property. They are unable to cash out early because of seller stamp duty. So there is basically no speculation and no overleveraging because the rules have changed to filter out all these people. People that owns property in Singapore now, are mostly in it for the long term, be it own staying or renting.
Despite of this, I still foresee a correction in some overheated segments, like new leasehold launches. Many new launches at the OCR region are transacting at over 2k psf. If we compare that to its resale counterpart, we can see a huge discrepancy in psf pricing. High mortgage rates coupled with banks pushing their tdsr calculation upwards means the amount of loan buyers can take on is now much lesser.
Usually over hyped up new launches will either cause long term languishing in prices or even correction over time. A good example is J gate way. Its launch was pretty hyped up last time. The prices over the years since then have not moved at all.
If you own an old leasehold hdb or condo. Do take note of the bala curve too.
Once your leasehold property is left with 60 years of lease. There will be some impact from using CPF to buy. You can only use CPF if the remaining lease covers the youngest owner till 95 years old. Age of youngest owner + remaining lease must be equal or more than 95. Basically government is encouraging people to buy home that cover them until they die.
This means if your leasehold property is left with 60 years, 34 years old and below cannot use their full CPF oa to buy from you.
Once your leasehold property is left with 30 years of lease, banks might not consider financing for buyers. This means buyers who wants to buy from you are unable to take a bank loan to do so.
This means the 60 years mark and 30 years mark will likely see accelerated correction of your property price because the quantum of buyers available will drop. Do note that once your lease reach 0 years, your property must be returned to the government with zero dollar value compensation.
So even though you think that you can out rent your property, your principal value will collapse to zero. A smarter move might be to cash out at a certain ideal period of time to convert your leasehold to freehold cash. This means protecting your principal while continuing to adopt a conservative approach with the proceeds by putting into risk free and tax free high yielding assets or high rated corporate bonds while saving up to buy another property. My preference has always been old freehold near mrt at reasonable pricing.
Price update for Glendale wise. In this new year, the price appreciation continues and the latest psf transaction reached another all time high of S$1,580. My last update last year showed a psf of 1,562. This means a capital appreciation of S$18,594 from the end of 2022 which is a 1.15% increase from YTD. This is likely a rough estimation as there is only one registered transaction in 2023 so far.
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