Jennifer Tay asked 7 days ago
Rusmin Ang Staff answered 6 days ago
Jennifer Tay
replied 6 days ago Hi Rusmin, thanks, understood. I mean just looking at the sg property market, is there a feeling that prices are at inflated valuations?
Jennifer Tay
replied 6 days ago to further elaborate
As majority of singaporeans have home mortgage loans and some on leverage to purchase additional, if the SG residential property burst, this would have a cascading effect on local banks shares and reits.
1. From your experience what are the warning signs?
2. Will the magnitude of impact on bank shares be worst than reits? given that a significant portion of banks revenue are from loans and private wealth management. which is more resilient, banks or reits?
Rusmin AngThe construction cost has gone up in Singapore. That generally pushes up the real estate prices and I do feel the same as you, the new launch prices are quite crazy nowadays but second hand resale market may not really be the case as we can still find affordable homes. Having said that, the latters are certainly more expensive compared to pre-covid level. Again, we got to look at the income among the locals which have grown quite a lot since pre-covid days. Within HDB market, our minister will tell us that they are still affordable for fresh grads based on their stats. So long there is no hard recession hit the global market or job market or interest rate going up significantly, I think property prices in Singapore should stay resilient but don't expect outsized growth like what we've seen over last four years unless inflation/construction cost really picks up again.
Bank will certainly get hit when there is a crisis in property market since we may see ppl start defaulting if they can’t pay up should they lose their job. Government had already introduces a lot of cooling measures to make sure ppl are not speculating in the property market, so I think we may not be able to see the kind of crisis that we saw during Asian financial crisis where property prices will crash 30% – 50%. So a lot of ppl who buy home in Singapore is really for stay. Job market the supply of real estate is very important because it will affect the property market here. Job will be affected by crisis which will lead to weaker demand in property.
So the signs are, if you start seeing ppl losing their job in a big way, that will affect both stock market and property market. Bank naturally will feel the impact if economy doesn't do well. Likewise, REIT prices will come down even though good quality REIT may continue pay stable DPU.
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