Property talk for 2012 and 2013

Property prices in recent months, have continued unabated- though it has slowed. Recap the year 2008? When US was suffering from recession (the aftermath of the housing bust), Singapore market dipped only alittle and shot up from there. And it seemed that it has not stopped for a rest since then.

Consider also the year 2011, buyers from China were the biggest group of foreign property buyers in Singapore outwinning Indonesians, our traditional foreign buyer at the number 1 spot. But what happens if foreigners were to stop buying Singapore properties? Will it be rosy?

Since interest rates are at a historical low now, it can only go up, and not down. In fact, interest rates on home loans can shoot up easily, as has in the past, to 3 per cent to 4 per cent. And the possibility of that is real, as US will probably have to contend with huge inflationary pressure in the months to come. But then again, the possibility of that being translated to a huge increase in property price also remains. And then you probably have the worst of two worlds: High Property prices and High interest rates. Owners who cannot foot the bill may not be able to hold on. But with Singapore hinging on to China, we should be fine. Realise that I did not say US but yes, surprise, surprise... the whole Asia,whether you like it or not, depends on China now. China has been doing the right thing with her economics and is expected to continue.

On Singapore's front, more than 30,000 condominium units will be completed in the next two years. We are left with the question of whether the increase in the number of units can cause the price to drop, in the situation that overseas funds are flooding the market. Its hard to say.

But if the property price increases irregardless, rentals might not decrease as people who cant purchase a unit can only resort to renting for a roof over their head. But if property price decrease, rentals will likely go down since its now easier to own a place... I suspect the decrease to be minimal though, especially if it is to be a case of rampant inflation.

Even when you consider the following: HDB built 8,000 units in 2008. This did not stem the increase in hdb price then. But in 2011 and 2012, HDB is going to build 25,000 units in each year, totaling 50,000 units in the span of two years. In 2011, hdb price also increased. It remains to be seen what will happen to hdb price at the end of 2012. With supply of both condominiums and HDB flats expected to surge in the next two years, this makes the case of HDB flat price dropping a real possibility but not an eventuality.

According to Yu Kam-hung, a Hong Kong-based senior managing director for valuation and advisory services in Greater China at CB Richard Ellis Group Inc., said, "Property prices will start to decline soon and we are likely to see that in the rest of the year." He reportedly added that "Prices will trend down by about 10 per cent in the next two years and I don't rule out the chance that they may fall as much as 20 per cent in the worst case scenario."

It will be most prudent to consider worst case scenarios when planning for the future, especially one that involves a roof over your head, however.