Random thoughts: The singapore property cycles.

I was thinking about property cycles.

I think to myself, there are plenty of unsold units from various listed developers, mostly the luxury segment. 

Given that in another 1-2 years, most will be hit with penalty for holding them vacant, they either can pay the penalty or reduce price to move them. 

When they slash price to move them in the environment of increasing interest rate as well as supply, wouldn't it create a domino effect? 

Maybe it would be a good time for some property shopping for this new property cycle in a year or two.

I decided to check my "theory" or thoughts.

http://www.ura.gov.sg/uol/media-room/news/2014/oct/pr14-64.aspx

Indeed, there is no shortage of supply, there are planned supply of 74kof private 

Properties units excluding EC units, 12k remain unsold. Not bad, most already have buyers. 

But include the planned GLS and EC, planned supply become 97K, so we need to find 30K of owners over the next few years.

It did not seem really like an oversupply to me. Given that every year, singapore register about 27 k of new marriages. Granted, most will start with HDB. But non-residential population is big in Singapore. About 1.6 million, excluding tourists. These are the people who cannot buy HDB. It used to grow at around 4% annually, assume the tightening continue and they grow at 2%, ,that is still 32 K increase per head. Some will rent, some are families etc, but the 30K supply do not seem scary then.

Refer to page 11, 

http://www.singstat.gov.sg/publications/publications_and_papers/population_and_population_structure/population2014.pdf

Most importantly, I think due to the highly regulated property sector in Singapore, through GLS, it seems supply decisions are based on price, rather than price a result of supply demand balance. 

Looking at the last graph from property cycle. 

http://www.singaporepropertycycle.com.sg/market-trends/singapore-property-price-index-and-supply-in-pipeline/

The supply directly correlated with the price, I would expect an inverse correlation. I tried to search backwards on the data during the 1997 year, where the property price went on freefall. I could not find detailed details on non residents growth, although from 1994 to 2004, resident population growth rate is stable at around 2.

Anyway, take sometime to take a look at this page
(http://www.singaporepropertycycle.com.sg/market-trends/)

Various macro trends, Sibor does show some inverse correlation with PPI. The next will be vacancy.

The website has the same conclusion, that barring population growth of 0.5% or lower or unexpected economic hardship, there do not seem to be a case of over-supply. Also barring above average of 4% sibor rate, which hardly will happen in the next 2 years, the impact on PPI will be mute too, but watch the vacancy rate.

In conclusion, I do not think waiting for a year or two will cause a big downturn in property cycles. But I think there is plenty of ammo for the news to be alarmists, oversupply, vacancy, interest rate.