The residential property market has been sinking, and I think it will sink some more. The patient house-hunter will be rewarded. I had previously written about the implications of the DPS, the effect of which should really start to show in a big way, around June 2009. In addition, today the media also has other news to suggest that the property market is in for a huge dive:
Grim forecast of 300,000 job lossesI kinda foresaw this coming. Three months ago, I wrote on this blog:
Most expected to beforeigners hired in past 5 years
Wednesday, January 21, 2009
Ansley Ng, TODAY
IN what an expert called a “doomsday prediction”, two economists say Singapore may lose 300,000 jobs by next year, of which two-thirds would belong to foreigners.
As the Republic grapples with what is likely to be its worst recession, “recent surveys all point to many more firms planning to fire than hire, a finding backed by anecdotal reports of job cuts by leading firms in their sectors,” said economists Cem Karacadag and Kun Lung Wu of Credit Suisse Group in a report that has raised many eyebrows with its alarming forecast.
Credit Suisse had similarly drew attention last May when it issued a deeply bearish outlook for the Singapore property sector and while there was some initial scepticism, subsequent data have largely borne out the accuracy of its call.
But analysts Today spoke to — though agreeing that a higher-than-before number of jobs will be lost this year on the back of the increasingly grim economic outlook — felt that the Credit Suisse jobs report was too pessimistic. Barclays Capital economist Leong Wai Ho said: “I think we have already seen the nature of the severity, I don’t think we will get much worse than that.”
Mr Leong predicted retrenchments to reach around 35,000, with the unemployment rate to peak at the second-quarter of this year at just over 5 per cent.
The Credit Suisse report gave a sectoral breakdown of its headline 300,000 number: About 160,000 positions will be shed in the services industry; 100,000 in manufacturing; and another 40,000 in the construction industry. “As harsh as our assumptions may seem, they only imply that the economy gives up all of the jobs it created in 2008 and a portion of the new jobs in 2007,” the Credit Suisse economists wrote.
Two out of three of the jobs lost would be held by foreigners and permanent residents. With the exodus of these foreigners, Singapore’s population will shrink 3.3 per cent to 4.68 million next year from 4.84 million now, said Credit Suisse.
Real estate experts say the property market — which has already been hit by the fallout of the global financial crisis — will be further buffeted by the repatriation of expatriates as companies downsize.
“The first market to be affected would be your residential and your prime residential market, because an immense source of leasing activity comes from foreigners,” said Mr Donald Han, managing director of property consulting firm Cushman and Wakefield ....
According to my crystal ball, residential rentals must fall sharply this year. A host of new, big residential projects (all of which were launched in the recent bubbly years), will get completed soon. What happens next? The market will be flooded. At the same time, due to the economic slowdown, many expats might predictably pack their bags and go home. This would lead to a further collapse in residential rentals.Of course, none of the above was particularly difficult to foresee, even three months ago. What's staggering about the Today report is the size of the figure - 300,000 jobs - predicted by Credit Suisse.
The stock market has also crashed very badly. Many Singaporeans would have lost serious money. Bonuses will shrink. Thus many potential property buyers would be eliminated. Furthermore, a real recession is very likely to be on the way (the technical one is already here). Some people will lose their jobs. And among them, the highly-leveraged home-buyers of the past few years will be blown apart.
How quickly the residential property market will collapse will actually depend on the proportions of expats in Singapore who are on an Employment Pass, and on a Special Employment Pass. What's the difference?
Both passes enable the expat to reside legally in Singapore. However, an Employment Pass is tied to a specific employer. If the expat loses his job, the EP becomes invalid and the expat has to leave Singapore more or less immediately (7 days, to be precise). His family has to leave with him too.
A Personalised Employer Pass affords more flexibility. The PEP is not tied to a specific employer. If the expat loses his job, he can stay for up to another six months in Singapore to look for another job.
PEP was introduced only in January 2007. It was one of those "we embrace foreign talent" schemes. Most expats who had come to Singapore prior to January 2007 are probably on the EP, not the PEP, unless they had had the foresight to effect a conversion of their EP to a PEP earlier on (I'm assuming that there's some procedure to do this).
Of course this is precisely the kind of precautionary step that most human beings don't bother to take, when times are still good. An EP is as good as a PEP, when job security is not in doubt. But now, when times are bad and unemployment is rearing its ugly head, the government will not be so free and easy with EP-to-PEP conversions.
As for myself, I am being prudent by deferring my property purchase. After all, I work in a bank, not exactly the safest place to be, nowadays. I have fairly substantial back-up funds, but still ....