Based on historical analysis, a drop in total sales volume over four quarters tends to lead to a fall in the overall Urban Redevelopment Autority's private residential price index.
Other factors affecting Property price
- Rental market weaken in the same period. Rents fell.
- Interbank three-month Sibor rose. Buying property for investment became less appealing.
- Stock market began to decline over the same period. Decline in business environment.
- Loss in wealth in the stock market motivates investors to sell assets.
- Higher unemployment
With the increase of the Deterioration of property market basics coupled with rises in "wealth destructive" factors will negatively affect property prices.
What's now...
Going into the new year, the wealth creation effect appears to be largely on track. The Singapore stock market is expected to perform well this year, on the basis that forward price-to-earnings ratios are still undemanding compared with previous peaks.
Business prospects look more promising and employers are planning to expand hiring and increase wages and bonuses. A sharp increase in interest rate appears to be muted.
Looking forward...
Expect more market cooling measures, which will remain as market risk in 2011.
Expect the market to face immediate downward pressure on volume and prices, the year-on-year price fall in 2011 could be marginal. In the meantime, people interested in properties should keep watch for any of the "wealth destruction" catalysts, which in some instances can fall into place very fast.
Buyers should note the potential for a weaker rental market from next year due to the large number of housing units to be completed from then onwards. Buyers who are stretching their last dollar to buy their dream home might want to dream less and work their numbers based on more prudent assumptions and exit strategies.
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