Before moving towards the Property Market of Singapore, it is necessary to understand; how the Property Market Cycle works?
As a property investor, you need to keep an eye on the Property market cycle at the microeconomic as well as macroeconomic levels.
So first we will take a brief look at the Property Market Cycle and then we will move towards the Property Market of Singapore.
So the question is; what is a Property Market Cycle and how does it Work?
Property Market Cycle
This is a kind of cyclical pattern that is consisted of four phases and the Property Market moves through these phases. It usually revolves around the Supply and Demand of the property, commercial as well as residential. A fair knowledge of the Property Market Cycle helps you to make better investment decisions whether you are a home buyer or a Real Estate agent. It also guides you to make better predictions of upcoming trends in the Property Market. As a property investor, you can be successful no matter in what phase of the property market cycle we are, by adopting particular strategies. As a property investor, you need to determine in what phase of the property market cycle, your property stands whether it is in recovery, expansion, hyper supply, or recession phase. It will guide you to make a better choice to decide for how long you must hold your property and when it is the best time to exit. To find out more about how to get cheap new condo launch, click here.
Four phases of Property Market Cycle
Property Market Cycle works in following four phases’ pattern;
Although it is taken as the first phase in the Property Market Cycle, it is a cyclical pattern so the recovery phase comes right afterward the recession phase, the fourth phase of the property market cycle, and it is quite challenging to distinguish between both phases as the Property market remains stagnant during the phase. During this phase, the property market takes a start from the lowest point after the recession phase. During this phase, new constructions slow down and rental rates become very low. Occupancy also declines. As a property investor, this phase is beneficial for you as the property rates are low. You can then add value to your property during the rest of the recovery phase and then sell your property as the expansion phase approaches.
The property market is quite strong at this point as it is completely recovered through the recession phase. During the expansion of the property market, rental rates become high, availability of tenants rise, vacancy declines and here we can see multiple new constructions. This phase is typically the best time for property investors to make new investments or to restore old buildings since the demand for property is high during this phase.
During this phase, the supply of the property exceeds the demand for property as the formerly started construction developments continue to launch. As the supply beats the demand, rental rates become low and vacancies will rise. Still, investors tend to adopt various strategies to earn profit during this phase. They purchase properties at very attractive prices from companies that are ready to sell the property before the recession phase. These investors then wait for an expansion phase to come and then sell the property at high prices.
During this phase, the supply of the property surpasses the demand for the property since the demand for the property becomes non-existent during this phase. Due to this cause, there is a rise in vacancies and the occurrence of negative growth of rental rates. Since the property pricing is hitting bottom, some investors find it as an opportunity to make new investments. Then, they wait for the property market to recover and expand. Then, they sell properties at high prices.
Property Market of Singapore
Looking back at 2021, the year has been a prosperous one for Singapore. Even COVID-19 could not stop the Singapore property market to flourish. For six consecutive quarters, the property prices and transactions continued to rise and even the property market continued to thrive during that season of the year when traditionally there is no noteworthy activity in the property market(Lunar Seventh month). All this activity was done by local buyers as due to Covid most of the borders remained closed. About 25,000 HDB flats have reached their lowest occupation period in leading lead to an increase in demand for HDB resale flats. In December, the Government proclaimed to increase the ABSD (Additional Buyer’s Stamp Duty) rates, to narrow the TDSR (Total Debt Servicing Ratio), and to lower the LTV (Loan-to-Value) limit to take home loans from HDB.
What to expect in 2022?
Since the circuit breaker in Q2 2020, the prices have been increased but the growth is declining. There are about 31,000 HDB flats that are in minimum occupancy period during 2022, the effect of HDB upgraders is expected to continue. Here the effect of increasing ABSD rates is noteworthy. A lot of property buyers are affected by this increase, particularly investors as well as foreign investors. Although the local buyers are not subjected to increased ABSD rates, they still are subjected to the TDSR of 55%. The aim of these measures is to minimize household mortgage cost but such measures have extremely influenced foreign investors. Such investors then prefer commercial property investments instead. How the Singapore Property market reacts to these measures taken by the Government remains to be seen.
In 2022, there are very few new property development projects and we are expecting the development will be on a smaller scale. This decline in new launch property development is because the Government has reduced the supply of land for the last few years.