When Will Singapore Property Market Crash?

Exceptionally low interest rates environment and cheap mortgages. On 11 August 2011 the Singapore Swap Offered Rate (SOR) fell to below zero. 3 month SOR dropped to -0.6987%. SOR is the benchmark interest rate commonly use to determine mortgage rates. Theoretically a negative interest rate means you pay banks to keep your money or the banks pay you money to borrow from them! Now when the system is flooded with so much money supply and liquidity, where would those Ultra High Net Worth Individuals invest their money?

Sibor

Singapore’s population will continue to grow despite its low birth rate. Our long term population growth is targeted to reach 6.9 million in this tiny and sunny island. The fact is that we lack natural resources and highly dependent on human and intellectual capital for economic growth. Therefore Singapore has little choice but to welcome foreign talents and direct investments to grow this cosmopolitan society. Even at the current population density of 7000 persons per square kilometers we still have lots of room to grow.

The Singapore Government has major plans for the transport infrastructure and the future MRT rail network to accommodate the increased future demand. Under the latest LTA Transport Master Plan 2013, the Government is spending billions in transport infrastructure in anticipation of sustained population growth and the expected increase in public transport ridership over the longer term. A larger population will mean a greater need for homes.

Singapore Transport Masterplan

Singapore is highly recognized as a safe investment haven as evidenced by the strength of the Singapore Dollar. USD/SGD is on a serious 9 year bull run since 2002. Foreign investors are more and more willing to sell their home currencies and invest in Singapore dollar assets as physical hard assets are more secure and less volatile. That is why Singapore is still the only Asian country to have the coveted AAA credit rating.

Singapore - Currency

Latest Singapore inflation figures running at 5.4%. Cost of living are just going to get more expensive and not getting any cheaper any time soon. Land is a scarcity in Singapore and property will always trade at a premium. Using property assets to hedge against inflation is still the most effective and proven strategy. Like it or not, even if Singapore’s property market were to crash, it is still not going to come off cheap.

K Shanmugam