Property prices ought fall by up to 38% to match 2009 (pre-financial crisis) prices.
("private home prices have climbed about 60% since the global financial crisis in 2009."), so for current property prices to return to pre-2009 prices, the price will have to FALL by= 1- (100/160)= 37.5%.
Okay, maybe I forgot to factor in inflation at say 2.5% p.a. (pegged to CPF rate) which will mean that the reasonable FY2014 property price level (5yrs after FY2009) should be 113.14% in FY2009dollars (used compound interest calculator to calculate), so for current property prices to return to pre-2009 prices (corrected for (high) annual inflation of 2.5%), the price will have to FALL by= 1- (113.14/160)= 29.287%.
As mentioned in the Straits Times report, "Housing Board resale flat prices have slid 5.3% since June last year while private home prices have fallen 3.2% since September, going by official figures out last week."
And given the potential increase in living costs with PAP advocating GST increase after GE2016 (in addition to incessantly high inflation in recent years): life is gonna be getting very tough for average Joe.
It is thus reasonable for home/ commercial/ industrial property prices to be reduced so that living/ business costs might decrease as a breather to man-on-the-street. Of course another option would be to increase property taxes on larger, more luxurious units so as to avert the need to raise GST after GE2016.
Also, smart and creative people know how much rent they should pay. If rent in Singapore goes too high, then that is the END of the future of creative industries in Sink@poor and then the economy will really tank. A safe and affordable living atmosphere where creativity, innovation, service and environmentalism thrive is the golden goose of Singapore economics. To raise rents excessively would be to kill the Singapore goose that lays the golden egg: for that reason, rents (and by proxy: property prices) must be TIGHTLY CONTROLLED NOT allowed rise as excessively as was seen in recent years.
Thus, private property prices having "fallen 3.2% since September,", ought have at least a reduction of 25% more drop to go...
|Property curbs may be ‘eased faster if prices drop sharply’|
Property curbs may be 'eased faster if prices drop sharply': Straits Times
July 28, 2014 | News
By Melissa Tan
While the Government has said it is not time yet to relax the property market cooling measures, analysts noted that certain developments could prompt policymakers to act faster.
One could be a sharp drop in property prices within a short period, the analysts said during a round- table discussion organised by The Straits Times last week. The other would be a groundswell of unhappiness from a large number of home owners caused by sharply falling prices, the panellists added.
Their comments at the discussion, held at the Singapore Press Holdings office, comes amid a backdrop of a continued slowdown in the public and private housing markets.
On Thursday last week, Monetary Authority of Singapore managing director Ravi Menon said even though prices had eased, it was too soon to lift restrictions.
The softening of prices has recently led developers such as Mr Kwek Leng Beng of City Developments (CDL) and Mr Cheng Wai Keung of Wing Tai to urge policymakers to review some curbs.
Housing Board resale flat prices have slid 5.3% since June last year while private home prices have fallen 3.2% since September, going by official figures out last week.
This was after tough home loan curbs were rolled out in June last year.
Even so, experts said prices would likely have to fall a lot faster for policymakers to ease curbs, given that private home prices have climbed about 60% since the global financial crisis in 2009.
“I think they (policymakers) are looking for something more pronounced, a double-digit kind of price decrease,” said Mr Donald Han, managing director of consultant Chestertons.
“There’s more geopolitics risk now… Perhaps next year the Government may want to keep their hands a little bit closer to the button in case they need to unpick certain measures,” he added.
However, the experts were also quick to stress that a large price drop alone was likely not going to be enough.
CIMB economist Song Seng Wun said the speed of a drop is also crucial. “It’s not just the quantum but the period of time. If there’s geopolitics risk that suddenly adds pressure, it could be compressed within a short period of time.”
Mr Han agreed: “A 12% drop in 6 months would be very drastic, but a 12% drop over a 2-year period would be quite acceptable. It’s a timeline kind of focus for everybody, not just a number.”
Even then, they agreed that the psychological threshold could be as much as a plunge of about 20% in home prices.
This is because many people tend to take a loan of up to 80% of their home’s value at the time they buy it. A subsequent 20% drop in the home value could trigger banks to ask borrowers to top up their loan in order to keep their home.
Hard data aside, policymakers are likely also keeping an eye on sentiment, experts said.
“There have to be a lot of genuine cases saying, ‘I cannot stomach a 10% drop’, and that will start to get the whole process of relaxation started sooner than later,” Mr Han said.
“But so far, it’s been very quiet.”
In the meantime, the curbs have helped to stabilise the property market, the experts said.
Mr Li Jun, general manager of Chinese developer Qingjian Realty, said the cooling measures benefit the market by preventing a price bubble.
“The economy is continuing to grow and the Government is stable in terms of its policies, so in the long term, Singapore is still an attractive place for investment,” he added.
The 4th panellist was Mr Eric Cheng, who runs real estate agency ECG.
(source: ST 28th July 2014)
02March2012: DPM Tharman: Government revenues need to be raised.
Full text:08June2012: Singapore's growth expected to slow in next decade
22August2013: GST hike ‘more likely’ if Govt needs to raise revenue for new initiatives