The dilemma faced by Singapore property investor

By Ryan Khoo / Alpha Marketing, The Edge Property | July 10, 2015 10:00 AM SGT
Real estate investment is quite a touchy subject now in Singapore. As the property market is fairly weak, investing in property has somewhat fallen out of favour. There is some apprehension in the market on what the future holds. We examine some of the trends that investors face today.
Property prices have fallen, but have they fallen enough?
The Singapore private property price index has fallen 4% in year 2014. As of Q1 2015, this index has fallen by another 1% so all in about a 5% drop. In comparison, HDB prices dropped 6% in 2014 and another 1% in Q1 2015.
Has prices fallen enough and are property buyers attracted to come back into the market? Well we have seen the number of resale transactions climb back up in late May but delving into the transactions, a significant number was in prime districts 9, 10 and 11 so it is still too early to say that it is a broad based recovery.
And if you ask the average person on the street, chances are that they will answer that property prices are still too high. And that's not surprising considering from a property index perspective, we are back to the 2011/2012 prices and even back then, affordability was already a concern for many.
Existing home owners are not a happy bunch
If you own a property in Singapore today be it a private condominium or a HDB flat, you're probably not very happy right now. Prices are trending down and the capital gains on your property has dropped from over a year ago. Rental values are also falling across the board as there is more property supply now and with tightening immigration (less foreigners working here) and rising interest rates, your rental yields are getting squeezed and is not as good as before. The property cooling measures have also made it difficult to sell or buy or refinance.
Interest rates a big concern
Interest rates in Singapore are low but rising. 3 month SIBOR rates have about doubled from a year ago and at June 2015 is at 0.83% from 0.36% in June 2014. With the US economy showing signs of growth and expectations that the US Federal Reserve will raise rates in September this year, the expecation is that interest rates can only go up. And with rental yields in Singapore hovering around...