What if Godot really appears?

The wife and I chanced upon this really interesting research article by Associate Professor Lum Sau Kim from the National University of Singapore. It provides a good insight on the various policies and measures that the Singapore Government has implemented on the private housing market during the past decades.

http://www.ires.nus.edu.sg/workingpapers/IRES2011-005.pdf

What we find most intriguing is factors that prevailed prior to the last two economic downturns (i.e. the 1997 Asian Financial Crisis and the 2008 Subprime Crisis) are very much evident today:

• Bullish sentiments at the back of sustained economic growth and low inflation expectations
• Spectacular bull run in the stock market
• Record job creation
• Increasing concerns about the sustainability of US economic growth
• Ample capital inflow keeping domestic interest rate and risk premia low and encouraged more risk taking in the property market.

We recall reading comments from certain industry expert that even if the Eurozone crisis unfolds, the impact on Singapore property prices is only perhaps 20% below today’s prices.

The wife and I are definitely no experts but if our memories served us right, property prices actually fell by more than 30% during the 18 months following the Asian Financial Crisis.

We understand that the Urban Redevelopment Authority's (URA) Private Residential Property Price Index has climbed about 50% in the last 18 months. On a year-on-year basis, the private residential index has shown growth every quarter for the last six quarters.

And looking at the chart below, would you bet against a significant price correction or even a property market “perfect storm” if one or more of the major economies around the world falter?

So even if you have been staying in the sideline for the past 18 months (and possibly missing out on the action and returns), while the property you are eyeing (especially for investment purpose) has only increased by less than 20% in price and trading well below their newer neighbours, we remain skeptical on whether it is really the opportune time to enter the market now.

Then again, we are not the experts...

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