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What makes the value of a property rise?

Land scarcity in Singapore is the main reason Marketers use when explaining to home buyers about why Singapore’s property market can fetch a premium price.

Let’s discuss and see whether we can come to a conclusion whether the value of property in Singapore will continue to rise.

Housing Supply

Almost 3-quarters of the land in Singapore are state lands and our policy makers control the supply of the housing, and when they control the supply, they can also directly control the property price.

Singapore had already planned its land usage prior 50 years. The housing supply is guided through the URA Concept Plan and reviewed through the URA Master Plan.

As Singapore has only a small land area, it makes the land very valuable. Hence, policy makers have to be very careful in planning the land usage.

Having said that, even though our land size is small, the airspace is infinite. With advances in technology, buildings can be made taller and taller.

Singapore Housing Index
Source: Ministry of National Development

From the graph above, you can see that the number of BTOs are decreasing. At its peak, between 2011 and 2013, about 25,000 flats were being built each year. But in 2018, there were only 17,000 BTO flats built. Coincidentally, those flats from 2011-2013 are entering the resale market after reaching the minimum occupation period.

It seems like the policy makers are slowing down to build new flats as there may be a bumper surplus of housing.

Population Size

An increase in population size creates demand. If the demand is not met, the prices of supply will increase.

There are ways to increase population and the most direct way is to invite foreign talents to our country. Foreign talents bring their expertise here and also create a demand for housing.

However, like all other things, too much of something might not be necessarily good.

Foreigners would form their own echelons as they do not have to adhere to our ethnic integration policy. They will not understand the Singaporeans’ way of life and our unspoken culture.

Another way, is to spur Singaporeans’ population growth rate. Like all other developed countries, Singapore also share their population’s low birth rate.

This method is much loved by us as there are a lot of benefits given such as grants and subsidies. But even with the effort to boost birth rate, it does not seem to be as effective as how the policy makers had hoped for.

Population size is determined by the policy makers and how aggressively they will want to boost the population and this will in turn, cause the property price to rise.

Job opportunities and income growth

Singapore continues to be seen as a global economy and a business friendly environment. This is so to attract talents here and also to create jobs for Singaporeans. Hence, quality jobs will pay attractive salary, which in turn, make homes more affordable.

No work, no pay, no job.

A low paying job will cause an affordability housing crisis. People will not be able to afford the high property prices, which will lead to low demand on housing.

And the policy makers, will now have to spur demand by using grants.

Existing policies

Existing policies can increase or decrease the demand for properties.

Policies such as housing grants, makes homes more affordable. Grants makes property prices look affordable, especially for those who do not have cash as down payment.

Property prices will rise with the availability of grants.

We should all seize the opportunity to get as many grants as possible. However, it should not be used to buy a place that we can’t afford.

Just because we have just enough to pay for the downpayment using the various grants, does not mean that we should overstretch ourselves with the monthly housing instalments.

On the other hand, cooling measures such as additional buyers stamp duties and seller stamp duties decrease the demand for properties. During an economic boom, cooling measures are used to slow down the property demand and will be lifted during an economic slowdown.

Many factors not in our control

All factors mentioned above are beyond us. We do not have any direct influence on them.

It is better that we focus our energy on things we can control like our personal finances.

With the 5 Basic Checks, we can make our decision based on logical reasoning. A home should not be your only investment plan.

A home is something that we buy to shelter our family, our dreams and aspirations – not a financial nightmare, which keeps us awake all night.

Let’s not dwell on those things that are beyond our control.

It’s okay if our current home is not appreciating in value as we’d like, a new exciting adventure will start again once we can afford to move to another home.

Andik Imran

Engage an agent who serves, not sells

ANDIK IMRAN | BSc Business
CEA Reg No: R061801F

9450 8732
PropNex Realty Pte Ltd

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