CAN S’PORE RISE UP TO NEW CHALLENGES IN 2017?

The financial hub faces uncharted waters in Trump era.

Singapore is definitely a difficult market to crystal-ball right now. On one hand, you have the sudden economic decline, rumours of China’s unhappiness with the city state, the possible falling out of favour with America’s new President-elect, uncertainties about the next lap and a fairly new and inexperienced team helming the country. On the other hand, Singapore’s resilience over the last 50 years is evidence of its ability to transform and adapt quickly to changes. Along with its strong national reserves (ranking 11th in the world), this small but significant country is able to punch above its weight and pull out surprises which defies conventional expectations.

WHERE THE MARKET IS NOW

The Singapore property in Q3 2016 experienced a 1.5% fall, its 12th consecutive quarter of decline. While many attribute the fall to the 8 rounds of severe cooling measures implemented since Sep 2009, it might be interesting to note that the decline only started in Feb 2013 after round 6 in Jan 2013 (Additional Buyer Stamp Duty (ABSD) and restricting loan for second property to 50% margin).

In other words, the first 6 rounds of cooling measures that included Seller Stamp Duties and loan restrictions on second or more properties had little effect on the market. In Jun 2013, round 7 which implemented a Total Debt Servicing Ratio (TDSR) of 60% further suppressed the market, making it near impossible for investors to buy beyond their loan servicing ability.

Some may deem the cooling measures have finally hit the spot and we heartily agree. After all, ask any investor about the cooling measures and both ABSD and TDSR will quickly come to mind. However, we think that the controlled fall that the government would have preferred has somewhat taken a life of its own along with the global economic challenges that Singapore now faces.

THE CHALLENGES

Traditionally, Singapore is a close ally of the United States due to its geographical location as a port where East meets West and its seeming leadership in ASEAN. For the same reasons, China has always held us at arm’s length maintaining a cordial, while distant, relationship. The recent aggressive investments by China into ASEAN and the recent US presidential election outcome are poised to change all that.

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