Khaw worried about private property market
National Development Minister Khaw Boon Wan has urged investors and upgraders to think about the uncertainties before purchasing a new private home.
In a blog entry titled "My Worries", Minister Khaw wrote about the development of property prices in Singapore and advised buyers to beware of sudden changes in the property market.
He gave the example of the US property market crashing two years ago where housing prices peaked and declined rapidly, causing a huge drop in property prices.
"Sharp property prices increases cannot go on forever," Minister Khaw wrote.
Calling it his "duty" to alert property buyers, he listed several reasons why things can go very wrong suddenly.
He shared that 35,000 private condominiums and landed properties have already been sold, though still in construction and there are an additional 45,000 private units waiting to be built and sold.
He also pointed out that due to a strong demand from developers and property buyers, the Urban Redevelopment Authority announced a Government Land Sale Programme where a further 8,000 private residential units will be introduced into the market. In total, there will be some 53,000 private residential units on sale over the next couple of years.
In response to this, netizen Melvin Lee commented that "53,000 private apartments in the pipeline looking to rent out would not be easy. Most expatriates are finding Singapore to be expensive to work here."
However, Minister Khaw added that the "external situation is not very bullish".
"Europe sovereign debt will take a long time to clear. The Middle East crisis can still go ugly. If that leads to a spike in oil prices and halts the fragile global economic recovery, the impact on Asia and Singapore will be direct and immediate," he said.
He understands that some 16 per cent of private properties are bought by foreigners and a significant amount of private units bought by Singaporeans are rented to foreigners who are here in Singapore to live or work.
Minister Khaw felt that "in the event of any external shock, both foreign demand and rental demand can fall quite quickly."
He explained that when a drop in demand happens at a time when there is a substantial increase in supply, the impact of such a scenario is serious.
Real estate analyst from ProprtyGuru, Tejawi Chunduri told Yahoo! Singapore that she agrees with Minister Khaw's views.
"With such abundance in the supply of residential units, there are chances of a potential downturn waiting to happen in the coming years."
"Despite the January measures (touted as the harshest among the recent rounds) announced by the government, the private property market has not had much cooling effect," she added.
Minister Khaw emphasised that a market correction or crash is not a given. The economy will continue to grow and property investors can enjoy good returns but no one is immune to mishaps, he said.