Property News & Market Trends

Singapore property prices still low compared to others?

Just a couple of days back, I was hanging out with a group of property investors. As we chatted, I casually mentioned that Singapore property prices are still relatively low compared to prices in HongKong, London, New York or Tokyo.

"That's absurd!" retorted a property investor, who had bought 6 properties before the huge spike. "It's unreliable to make such comparison. Look at their economies, their wages, their per capita and the average prime prices. Then you'll get a good feel of what's wrong with Singapore property prices." as he reasoned like a pro.

At first, I would have argued with him as "experts & analysts" all agreed that prices still have a long way to go before it catches up with the other prominent cities. On second thought, I felt he had made a point many refused to see.

We compared Singapore in the same class of the world's finest cities. I feel proud if the world felt the same. Unfortunately, hosting an F1, building 2 Integrated Resorts with casinos do not put us in the same league, much as I wanted it to.

New York and London are obviously out of range. We should never compare our living standards against theirs. Some reports were quoting the high end range of S$6000psf in HK, S$9000psf in NY, S$8000psf in London and S$7000psf in Tokyo. Singapore is only S$3000psf. It's still cheap, they said. Is this a logical comparison?

Guess what I gather from a run on Google's engine? New York's median wage (in Manhattan) of US$1453 per week(equivalent to Singapore's S$8718) is in no way comparable to Singapore's CBD median wage of S$3000. HongKong's median wage earners took home an average of HK$25,000(S$5000) and Y$335,522(S$4227) per month for Tokyo coporate workers.(Pls note this is an estimate as there isn't an official comparison chart available. Maybe someone should put up one)

Based on these estimates, our affordability is way below what an average median worker can in these "comparable" countries. So, why is Singapore's properties so buoyant? Prices are rising everyday! Just today, I witnessed an agent shaking his head in disbelief. Apparently, his buyer was looking at buying a Makena unit for about $1.42m last week. This week, the owner refused to sell for anything below $1.65m. That's an incredible 16% increase in a week!

This is not a singled out case. Even in HDB markets, agents had experienced volatile price increase by owners trying to outdo the neighbour. This is a case of "kiasuness" displayed. No one wants to be a "sucker" of selling lower than his neighbour and "lose face". This situation can't go on for too long. Once the buyer tsunami is over, prices may drop drastically as there are no sustenance in this market. Already there are signs that sub-sales are declining. Prices have eased a little for those who demanded a high profit. Only the fabulous units took their shots.

What we should see an a gradual and steady increase of up to a 10% by year end. But if this situation persists, prices would have shot up more than 30-50% in some areas by end 2007. If we don't have enough foreign buyers, Singaporeans can't survive on such prices. Their loans will kill. Rental prices will fall, bad debts will rise and our glory will be over in less than a year!

The comforting view is - many of these high end condos are snapped up by super high networth buyers that will not be affected. Still, the worrisome view is - when will sanity sink in to those sellers who are not logical. If you sell high, you buy at a higher price. This higher price must climb even higher to achieve a healthy capital appreciation.

Banks are already bracing themselves and are cautious about giving out 80% - 90% loans to those who buys more than 1 properties. Foreigners are also finding it more difficult to get local loans unless they are working here with income evidence.

Come what may, though bullish, I must say, it's a crazy time for buyers, sellers & agents. If you took my recommendation couple of months back, you'd have bought property stocks instead. Then you should be laughing your way to the bank, shouldn't you? This is Danny 'Bingo'. Out.

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