Is It Time To Cash Out Of Singapore Property?

That's the big question.

Something that keeps me buzzing lately.

Here's why I think property prices will come down:

The Government Wants It To
With all the property cooling measures, stamp duties, restrictions on 2nd property loan, total debt to financing ratio, the impact caused is already being felt. From a rational standpoint, these restrictions make sense because property prices cannot continue to go higher, unless we the citizens want inflation to skyrocket. Furthermore, HDB prices especially, should be further reined in to provide affordable housing to the masses.

The Glut
There have been so many new private property and HDB launches in the last few years that many are predicting a glut. Come end of this year and over 2014 and 2015, we will be seeing many TOPs. All those who really want a first home will be appeased. Will there be that many Singaporeans out there with enough money to buy a second or even third property for investment?

Rental Yields Are Coming Down
Housing rental cost can be used as a forward indicator of future property price movement. With more properties out there in the market, more options are available for subletting. This leads to more choice for potentially tenants. In turn, competition brings rental yields down. As rental yields come down, less people see buying a property for rental as a lucrative investment anymore, so less investors buy property. Finally property prices end up coming down due to lower demand.

Interest Rates Can Only Go Up
With the SIBOR currently hovering around 0.5%, interest rates on loans are at a very low point. Isn't there only one direction it can turn? So when interest rates go up, the loan instalments go up. People have to pay more out of their own pocket to maintain their monthly payments. Less money to spend. Some may even find the rise in monthly payments untenable and hence put their property out on the market to cash out. More sellers come into the market. More supply + Less demand = Property prices coming down.

That 6 Million Population Placebo
Alot of housing agents argue that since the government wants to increase the population of Singapore to 6 million, the demand for housing will be there. But let's take a step back and think about this for a minute. Sure, it is likely to happen, but where are these people going to come from? Currently, they're from China, India, Malaysia and the Philippines predominantly. Are the rich and famous all coming here en masse? NO! The new immigrants are coming here to create a new and hopefully better life for themselves too just like our forefathers did! Would they be able to afford a 600K HDB from day 1 of setting foot on our shores? NO! Even a HDB grant-filled 3 room BTO which even newly minted citizens are eligible for, would set you back about 250K now. Can the new immigrants afford these much less the private properties? I think not.

Perhaps it is time to get out if you can. Otherwise, make sure you have the holding power to tide through a property downtrend.

Of course I could be wrong, but the signs are all there.