singapore property weekly issue 244

8/20/2019 Singapore Property Weekly Issue 244

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Issue 244Copyright © 2011-2016 www.propwise.sg. All Rights Reserved.

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CONTENTS

p2 Singapore Interest Rate Outlook for

2016 and Beyond

p11 Singapore Property News This Week

p13 Resale Property Transactions

(January 6 – January 12)

Welcome to the 244th edition of the

Singapore Property Weekly .

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

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SINGAPORE PROPERTY WEEKLY Issue 244

Page | 2Back to Contents

By Paul Ho (guest contributor)

In Singapore, the Sibor (Singapore Interbank

Offer Rate) seems to be highly correlated to

the US Federal Reserve Target Funds Rate.

Hence, we tend to watch the US FederalReserve to get clues on where mortgage

interest rates in Singapore are heading.

In August 2015, we forecasted that “at a rate

of a ~0.1% drop per month, by November the

unemployment rate should fall below 5% and

the Fed may be tempted to raise the Fed

Funds target rate by 0.25% to 0.5% as a

precautionary measure.”

Singapore Interest Rate Outlook for 2016 and Beyond


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In December 2015, the US unemployment

rate dropped to 5% and the Federal Reserve

raised the Federal Reserve overnight funds

rate from 0.25% to 0.5%.

Chart 1: US Unemployment rate versus US

Disposable personal income per capita

(TradingEconomics, US Bureau of Labor

Statistics, iCompareLoan.com)

The unemployment rate which is at 5% in Dec

2015 looks to be on a downward trend while

disposable incomes are rising. Economic and

political pressures are building up for wage

growth in 2016. 13 US states are raising

minimum wages (Source: CNBC).

Chart 2: Percentage change in wages, 2014 –

Nov 2015. Bureau of Labor Statistics


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The US Federal Reserve will watch keenly

whether the economy is over-heating and

causing inflation, and if so will raise interest

rates to cool it down.

Labor tightness contributes to inflation, while

import price drops is disinflationary. However,

personal consumption is 68.83% of the GDP

as at November 2015, hence rising

disposable incomes would likely lead to

inflation, while oil price may recover in 2016,increasing inflationary pressures.

Chart 3: US Import Prices, Jan 2014 to Jan

2015, Bureau of Labor Statistics


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The rest of the world is largely in a

deflationary environment and this has caused

US import prices to dip, further aided by the

strengthening US dollar. Oil import prices

have dropped, playing a larger part in the

drop of aggregate US import prices, leading

to low inflation in the US in 2015.

Interest Rates in Major Economies

Is the world headed for recession? We can

look at the respective regions’ interest ratesas an indicator.

Chart 4: Interest Rates in the 4 Major

Economies Dec 2015, TradingEconomics

Euro Area interest rate is flat at 0.05%, the

lowest ever. China’s 1-year benchmark

lending rate broke a new low at 4.35% and

Japan’s interest rate is 0%. This indicates

weakness in the economic outlook in Europe,

China and Japan. In the case of the Euro

Area and Japan, interest rates cannot drop

anymore, hence monetary easing is

implemented to try to create inflation.Euro Area, China, Japan and United States

make up about 65% of the world’s economy

at about USD18 Trillion, 10 Trillion, 4.6 Trillion

and 17 Trillion respectively. The United

Stateslooks to be recovering while the rest of

the world struggles with slowing economicgrowth.


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Impact of Singapore’s Open Economy and

Price Stability

Singapore is an open economy where trade is

more than 250% of its GDP.

Chart 5: Selected countries Trade as a

Percentage of GDP, Worldbank,

www.iCompareLoan.com

With such huge imports and exports, this

means that domestic policies, money supply

and interest rates have a lesser impact on

inflation than the exchange rate.

A stronger Singapore dollar will lead to cheaper

imports and lower inflation but costlier exports,

while a weaker Singapore dollar will lead to

higher inflation (due to higher import prices) but

potentially higher exports.

However, higher interest rates do not severelyimpact the manufacturing sector as Singapore’s

manufacturing sector consists of larger

companies which can largely self-fund their

expansion or transfer funds from their

headquarters. Interest rates affect property

developers more.



SINGAPORE PROPERTY WEEKLY I 244

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MAS has observed that the USD Sibor (3m)

and SDG Sibor (3m) track each other closely,

hence the high correlation between US

economy and that of Singapore. Moreover,

due to Singapore’s role as an internationalfinancial centre with an open economy, “small

changes in the difference between domestic

and foreign interest rates can lead to large

and quick movements of capital.” (Source

MAS). A negative capital account indicates

capital outflow and is generally undesired,unless the outflow is due to investments

overseas.

MAS Monetary Policy stance – Gradual

Appreciation of S$NEER policy band

For Singapore, monetary policy meansexchange rate policy. In the past, MAS has

adopted a “Gradual Appreciation of the

S$NEER (Singapore Dollar Nominal Effective

Exchange Rate) policy band”. Singapore’s

weak economic growth meant that MAS has

to change its policy stance to “Gradual

Appreciation of the S$NEER policy band.

However, the rate of appreciation will be

reduced slightly.”

This simply means we will still continue to

maintain a strong currency, but will reduce the

rate at which the Singapore Dollar becomes

stronger.

Because of Singapore’s open economy, smallchange in US interest rates as well as that of

Singapore’s major trading partners “can lead

to large and quick movements of capital.”

Hence the US Federal Reserve interest rates

hikes will lead to Singapore interest rates

rising in tandem.

Singapore’s use of the S$NEER means that

Singapore will weigh its currency appreciation

against the trade-weighted basket of

SINGAPORE PROPERTY WEEKLY I 244


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currencies. This likely means a slight

depreciation against the USD and HKD and

slight appreciation against its major trading

partners, given their current economic

weaknesses.

When there is weakness in the economy, a

country cannot artificially maintain a strong

currency stance unless it has huge foreign

reserves to defend itsstance, or it may open

up arbitrage opportunities to currencyspeculators such as George Soros. Hence

Singapore’s adjustment of its policy stance is

the right policy as it removes any potential

mispricing.

The day SOR went negative

On 17 Aug 2011, the Swap Offer Rate (SOR)

went negative. This was to stop the flood of

US dollars coming into Singapore dollar due

to the Singapore dollar appreciating against

the US dollar. Funds are willing to bear with

negative interest rates in view of an

appreciating currency.

Chart 6: Sibor Interest Rates, ABS,

iCompareLoan.comWhen a currency depreciates, the opposite

happens. Interest rates will rise to mitigate the

outflow of funds.



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Summary and mortgage interest rate forecast

for 2016 to 2018

The Federal Open Market Committee (FOMC)

forecasted the median fed funds overnight target

rates for 2016 at approximately 1.5%, for 2017 at

approximately 2.75%, and for 2018 at around

3.5%, with a longer run interest rate from 3.25%

to 3.5%. If these forecasts were to hold true,

these will similarly exert upward pressure on

Singapore dollar Sibor overnight rates.

A typical US economic recovery runs for several

years while Singapore is just entering a

weakening economic cycle which could last two

to three years. Singapore’s largest trading

partner China is also entering a slower growth

phase while its second largest trading partner

Malaysia is also slowing down.

Chart 7: Federal Open Market Committee

(FOMC) participants’ forecast



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An overall slight and gradual appreciation of

the S$NEER policy band, means that the

Singapore dollar will have to find the trade-

weighted “middle ground” – which is slightly

on the “appreciation” side. Given that the USis recovering and the rest of the world is

largely slowing down, this means that the

Singapore dollar will slightly appreciate

against many currencies while slightly

depreciating against the US dollar.

It is hard to predict the future, but based on

the current data, iCompareLoan.com

forecasts:

2016: Sibor (1m) to be in the range of

1.4% to 2%


1.9% to 2.5%


2.4% to 3%

2019 and beyond: Sibor (1m) to be in therange of 2.4% to 3%

By Paul Ho, holder of an MBA from a

reputable university and editor of

www.iCompareLoan.com, Singapore’s first

Cloud-based Home Loan reporting platform

used by Property agents, financial advisors

as well as Mortgage brokers.


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Singapore Property This Week


ResidentialQ4 2015 HDB resale prices up by 0.1%

For the first time in 10 quarters, resale prices

of HDB have risen by 0.1% quarter on quarter

in Q4 2015. Ismail Gafoor from PropNex

believes that resale prices have already hit itslowest in Q3 last year. Nonetheless, he

predicts that resale prices will continue to be

flat in 2016. More buyers are expected to

enter the market as cooling measures remain

in place. Also, as HDB resale prices fall,

homeowners may be less willing to upgradeto private properties, said Ismail Gafoor.

Eugene Lim from ERA Realty believes that

the market could have found its support level

as there is increased price stability. However,

Lim warns that with higher interest rates anda slowdown in the economy, it may be too

early to say that the market has recovered.

(Source: Business Times)

GCB at King Albert Park sold for $25

million A good class bungalow (GCB) along King

Albert Park has been sold for $25 million or

$1,493 psf based on a land area of 16,750 sq

ft. The bungalow which is freehold, consist of

two storeys and a swimming pool. It has a

built-up area of about 10,000 sq ft and wascompleted in 2012. Currently, the bungalow is

tenanted.




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Foreign buying falls as property sales

plunge

According to the Business Times, foreigners

have cut their purchases of private homes in

Singapore, leaving the market to depend on

local buyers at a time when domestic interest

rates are increasing. Data by DTZ showed

that in Q4 of 2015, foreigners including

permanent residents have bought 499

homes, which accounted for 16% of the total

transactions made. In contrast, more than

30% of the transactions made in 2011 came

from foreign buyers. Alan Cheong from Savills

said that Chinese buyers may have been

more attracted to countries like Australia and

the UK. To remain competitive, Cheongbelieves that stamp duties need to be

tweaked to retain buyer interest.


Commercial

Office vacancy rate in 2016 expected to hit

double digits

In Q4 2015, office rents have fallen by 1.8%while in Q3, office rents were down by 2.9%

quarter-on-quarter. In 2015, office rents fell by

a total of 6.5%, eroding most of the gains

achieved in 2014 when rents rose 9.8%.

Weak leasing demand, caused by a slump in

business sentiment, is expected to increasevacancy rates. However, as office stock is

reduced during Q4 last year, the overall

vacancy rate held steady at 9.6%. Christine Li

from Cushman & Wakefield believes that as

more than 4 million sq ft in gross floor area of

office space is slated for completion in 2016,

vacancy rates will increase this year.




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Non-Landed Residential Resale Property Transactions for the Week of Jan 6 – Jan 12

NOTE: This data only covers non-landed residential resale propertytransactions with caveats lodged with the Singapore Land Authority.Typically, caveats are lodged at least 2-3 weeks after a purchasersigns an OTP, hence the lagged nature of the data.

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 THE SAIL @ MARINA BAY 667 1,250,000 1,873 99

2 INTERNATIONAL PLAZA 1,604 1,550,000 966 99

4 TURQUOISE 2,153 3,014,200 1,400 994 THE INTERLACE 1,259 1,600,000 1,270 99

5 PARC IMPERIAL 398 650,000 1,632 FH

5 CLEMENTIWOODS CONDOMINIUM 560 720,000 1,286 99

8 CITY STUDIOS 474 625,000 1,320 FH

9 THE CLAYMORE 2,680 7,000,000 2,612 FH

9 LEONIE GARDENS 1,733 2,200,000 1,269 99

10 8 NAPIER 2,013 6,441,600 3,200 FH

10 RV RESIDENCES 678 1,430,000 2,109 999

10 DUCHESS RESIDENCES 1,464 2,490,000 1,701 99910 ASTRID MEADOWS 2,745 4,300,000 1,567 FH

10 TANGLIN REGENCY 850 1,095,000 1,288 99

10 TULIP GARDEN 1,701 2,100,000 1,235 FH

11 NEWTON ONE 2,411 4,100,000 1,700 FH

12 BALESTIER POINT 1,119 1,008,000 900 FH

12 CHELSEA GROVE 1,970 1,320,000 670 FH

13 PLATINUM EDGE 1,055 1,220,000 1,157 FH

14 THE ALCOVE 1,324 1,050,000 793 99

15 THE ESTA 1,001 1,530,000 1,528 FH

15 EAST SIGNATURE 1,001 1,220,000 1,219 FH

15 ONAN SUITES 818 960,000 1,174 FH

15 JOO CHIAT MANSIONS 1,238 1,125,000 909 FH

15 SERAYA COURT 1,841 1,050,000 570 FH

16 BAYWATER 1,302 1,190,000 914 99

16 BAYSHORE PARK 1,173 1,070,000 912 99

18 MELVILLE PARK 958 740,000 772 99

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

19 21 RICHARDS 409 650,000 1,589 FH

19 PARC VERA 1,141 1,100,000 964 99

19 CHILTERN PARK 1,572 1,325,000 843 9919 CHUAN PARK 1,173 900,000 767 99

19 RIO VISTA 1,249 955,888 766 99

19 BRIGHTON VIEW 1,227 900,000 733 FH

19 EVERGREEN PARK 1,173 830,000 707 99

19 FLORENCE REGENCY 1,690 880,000 521 103

20 SEASONS VIEW 1,152 1,096,000 952 99

20 THOMSON VIEW CONDOMINIUM 3,843 2,500,000 651 99

22 THE LAKEFRONT RESIDENCES 1,012 1,280,000 1,265 99

22 PARC OASIS 1,378 1,246,000 904 9922 PARC VISTA 1,270 1,050,088 827 99

23 HILLINGTON GREEN 1,356 1,300,000 959 999

23 THE MADEIRA 936 870,000 929 99

23 NORTHVALE 689 620,000 900 99

23 NORTHVALE 1,087 830,000 763 99

23 PARKVIEW APARTMENTS 1,119 795,000 710 99

25 ROSEWOOD SUITES 710 620,000 873 99

26 BULLION PARK 1,259 1,200,000 953 FH

27 THE ESTUARY 603 613,000 1,017 9927 EIGHT COURTYARDS 958 900,000 939 99

28 NIM GARDENS 1,830 1,570,000 858 FH



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singapore property weekly issue 244

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