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Home | Real Estate Blog | Articles | Video | Forum | Success Goal | 中文
Singapore Real Estate Market Review August 2010
It was indeed encouraging first half of 2010 this has been confirmed by the Ministry of Trade and Industry in the just released figures. The Singapore economy grew by 17.9 per cent in 1H 2010 and maintained the economic growth forecast for the 2H 2010 at 13.0 to 15.0 per cent. Compared to the 1Q , economy in 2Q grew by 44.5 measured on y-o-y basis this was better performance than the 16.9 per cent growth witnessed in the 1Q and when adjusted on q-o- q annualised basis the GDP declined marginally by 21.7 percentage points from the high growth rate of 45.7 per cent recorded in the preceding period.
As observed in the past 1H, biomedical and electronic production contributed to good performance in the manufacturing sector with growth rate of 44.5 per cent when measured on y-o-y basis. This growth in manufacturing sector was contributed by the production of high end pharmaceutical products and semiconductor chips which brought home much needed value.
As a response to the launch of more public housing projects by the government, the construction sector performed better than expected, managing a growth rate of 11.5 per cent, this is expected to continue as more launches come on board in 2H 2010.
As the global economies recover from the economic crisis witnessed in the past few years, Singapore service industries expanded by 11.2 per cent y-o-y in 2Q 2010 this is on the back of improved wholesale and retail trade which grew by a promising 18.9 per cent boosted by improving trade flows from the rest of the world and expanding credit lines from banks and foreign exchange trading.
Many of the sectors in the economy grew by double digit and this contributed to the Real GDP growing by 17.9 percent in the 1H, this is expected to continue to the second half of the year, again the same sectors leading the growth in the months to come as the global economic growth continue the recent recovery path.
However the Singapore economic growth will continue to remain resilient though will depend on economic conditions in US and Euro zone, as demand for Singapore products in the US and Euro zone improve then the current double growth rate will continue.
As expected with improving economic performance prices of properties continued with upward trend. According to the latest data released by Urban Redevelopment Authority, prices of private residential was up 5.3%, office space price went up by 4.6%, shops price edged higher by 3.9% and industrial properties moved up by 5.7% in the 2Q 2010. Close scrutiny of data reveals that as the economy improve the market sentiments improved allowing more buyers to come to the market this is expected to continue though may decline as more units come to the market which could lead to supply glut.
The rentals have also shown an increase in prices mostly driven by expatriates who have taken advantage of economic recovery. The expatriates are willing to pay more especially in the high end market segment. This can also be seen as a correction of the prices which had declined marginally in the past half of 2009.Private residential rentals increase was by far the highest edging up by 5.9%, significant as compared to shops which went up marginally by 0.5%, this could be because the consumers have not yet come back to the market and have taken caution adopting a wait and see attitude.
The construction and launch of private residential will continue to elicit interest especially with improving prices of the segment. The 2Q saw 61,831 private residential put up for sale with more than half still unsold and the office segment showing robust activity with 974,000 sq m Gloss Floor Area space expected to be available in the market, this will be a reprieve to the businesses and may see the price increase in the 2Q even out as businesses slow down consolidation experienced in the 1H on the back of improved economic activity, this means that the businesses that did not take office space expecting that prices would come down would commit and little space would be available. This can be supported by the news that agents are increasingly getting enquiries for commercial space as positive sentiments about the economy return and retailers take positions to take advantage of this.
The current price increase in almost all the sectors will see the return of speculative activity which the authorities have put policies in place to curb. Increases in the prices provide an opportunity to make a quick entry and exit but not for those in the HDD since they have to observe the minimum stay rule.
While some investors would want to wait until favourable time comes, others are now active in the sales. The Overseas Union Enterprise put its footprint by buying DBS towers for about Singapore $871 million form Goldman Sachs managed funds. Another notable activity was the bid place by Oxley Rising for Ubi road Industrial site with a bid of S$ 158 million this shows that investor confidence is slowly coming back to the market.
The government permanent resident policy seems to be working well with a marked improvement in up take of apartments. The foreigners acquisition of landed home surged, with 81 landed homes purchased by foreigners in the 2Q, this is in contrast to increased uptake of non landed homes by the citizens.
Table 1
Price Increase comparison 2Q 2010
Type of units |
% price increase in 1Q |
% price increase in 2Q |
Private Residential |
5.8% |
5.3% |
Office Space |
1.8% |
4.6% |
Shops |
1.8% |
3.9% |
Industrial Properties |
1.5% |
5.4% |
Source: Urban Redevelopment Authority
While private residential prices saw marginal decrease in the price increase in the 2Q as compared to 1Q all the other sectors had significant increase in prices based on q-o-q analysis. The price increase is expected to continue as the economic fundamentals remain strong and optimism returns to the market.
The Core Central Region (CCR) had more activity and experienced the highest increase in prices in 2Q 2010, generally prices of non-land properties were up by 5.0% in 2Q, apartments 5.2% and private condos by 5.0% with the CCR prices moving up by 5.4%, the Rest of Central Region 4.6% and Outside Central Region managing 5.7%.
The improved activities of foreign buyers was seen in the landed properties with 81 units taken and as a result prices in this market segment edged up by 6.2% in 2Q 2010.
Table 2
Rental Increase Comparison 2Q 2010
Type of Units |
% Rental Increase in 1Q |
% Rental Increase in 2Q |
Private residential |
4.7% |
5.9% |
Office space |
0.4% |
1.1% |
Shop |
0.1% |
0.5% |
Industrial Properties |
0.8% |
1.7% |
Source: Urban Redevelopment Authority
The decrease in rent is no more almost all the segments experienced rental increase in the second quarter as compared to the last quarter. Significant increase was in the private residential followed by industrial properties.
The current spike in both rental and sale prices come against the backdrop of over 60,000 units launched this about three year supply of what the market can take, whether the current rally in prices is sustainable remains to be seen. However with increased interest from mainland China for good investment in property then they can bridge the gap.
Demand by multinationals, government and domestic corporations in expected to recover in the months to come as they are expected to hire more staff and will continue to drive the sale and rental price in the office and industrials. While the private residential prices will be driven by the desire by the citizens to make investments but the price increase is expected to be gradual as there are many projects in the pipeline form the government and private developers.
In the coming months the supply side in the market will determine the direction the rental and sale price even though the economic recovery is on course, the prices may go south or north depending on how demand is, if demand remains high as it is the public up take of units will push the prices up and this could continue to the long run to the end of year. This will be underpinned by good news of economic recovery in US and the Euro zone which shows promise as banks continue to deleverage slowly taking the economies from recession.
The government policies will also continue to influence the direction the market takes. Continued policies to curb speculative activity that has already started will only make some investors slow their activities while waiting for opportune time to come back to the market while others will see it as an opportunity to invest as prices even out and show a more realistic figure.
The current push to have many projects is healthy as investors will be assured that there will be no shortage of units in the coming three years and thus will enable them plan beyond the horizon and not raise the rental and sale prices to unsustainable level.
Buy, Sell, Rent, Invest, In Singapore
Billy Chen
CEA Registration Number : R029372I
Tel: (+65) 88689999
Fax: (+65) 64021826
billy@billychen71.com
KF Property Network Pte Ltd
CEA Licence Number : L3008430D
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