Affordability?

[Cruncher]

I'm not a rich person, but I consider myself to have a pretty decent wage, probably well above local average. If I translate what I can afford into a maximum mortgage monthly payment (after putting down 200-300k as a deposit) the loan still comes nowhere near what the asking prices are for a lot of the condos today. So, for me it remains cheaper to rent (absolute amount of rent is a lot less than what I would have to pay in mortgage to be able to afford a condo).
My questions: who can afford $1,800-2,000psf or what that translates into as required rent? Are the immigrants and new PRs (who I assume form the supply for the rental market) all earning $30k a month? As these new condos get finished over the next few years and we see them up for rent, will they fetch the apparent $8-10k amonth in rent required to justify the price of the condo? Or will rents tend to remain sticky around the level they have been for years? (EG, around 5-6k for your typical, average 2/3-bed condo). There continues to be a lot of hype about wealthy locals (en-bloc millionaires), new-rich Asians and speculators plonking down $2-3m for a new condo. OK, but when they are all completed, what's going to happen then?

[wazzziz]

What will happen is that it will just go on and on.  The comimg year will see a lot of growth in Asia.  There are a lot of wealthy Indians, Indonesian and Chinese migrants arriving and so the prices reflect this. There is no bubble here or in China.

[Cruncher]

I don't disagree. But aren't those wealthy Asians buying at the luxury end of the market, as they have always done? And stats suggest those buyers have typically made up 20-30% of overall pvte property purchases? The condo market in Singapore has always depended on foreigners renting out units, I believe? So, how much rent can these foreigners afford? Are they all coming to work in Singapore earning $30k a month or more? (Assuming people spend a third of income on housing which is rule of thumb cos that is what they would need to afford $10k a month in rent, ie, rent required on a $2-3m condo?). If the majority of the workers coming here can't afford the level of rent required, what will happen as all these very expensive condos get completed over the next few years? Unless, you are making the argument that all the new condos going up have been bought for owner occupation by rich(er) Asians who intend to live in them?   

[wazzziz]

Theres no typical buyers anymore.  Previously you could have expected the lower to mid condo sector to be taken up by HDB upgraders.  Not the entirely case anymore although upgraders do make up a part of that market still. Lots of new expats, migrants and professionals are moving here from around asia and aim to purchase in that bracket too especially out on the east coast.  The luxury end and sentosa etc will no doubt be trageted by the wealthier ones from overseas.  The IR has had a good effect on prices remember.

[Oops,]

Start again. So really, a rise in prices is good for....noone!

[to OP]

I'm not a rich person, but I consider myself to have a pretty decent wage, probably well above local average. If I translate what I can afford into a maximum mortgage monthly payment (after putting down 200-300k as a deposit) the loan still comes nowhere near what the asking prices are for a lot of the condos today. So, for me it remains cheaper to rent (absolute amount of rent is a lot less than what I would have to pay in mortgage to be able to afford a condo).
My questions: who can afford $1,800-2,000psf or what that translates into as required rent? Are the immigrants and new PRs (who I assume form the supply for the rental market) all earning $30k a month? As these new condos get finished over the next few years and we see them up for rent, will they fetch the apparent $8-10k amonth in rent required to justify the price of the condo? Or will rents tend to remain sticky around the level they have been for years? (EG, around 5-6k for your typical, average 2/3-bed condo). There continues to be a lot of hype about wealthy locals (en-bloc millionaires), new-rich Asians and speculators plonking down $2-3m for a new condo. OK, but when they are all completed, what's going to happen then?

The rentals won't cover the mortgage in the future as rentals are going down and prices are going up. Remember that Singaporeans are using property investment as a form of pension plan. CPF savings are allowed to be used for buying property (whether for investment or own stay). This results in a lot of local's CPF savings getting invested in property and causing the rise in prices. Just don't get caught when everyone starts selling... 

Btw, no one would pay 5-6K rental for typical, average 2/3-bedroom condo. It's more like 3K.

[Agent007]

Seems a lot of people wish rents were going down. If in doubt check out the facts at the URA.

[oh yeah]

Seems a lot of people wish rents were going down. If in doubt check out the facts at the URA.

A whopping 0,6% increase in Q4 after all the hype with IR opening in January etc. 

Check the supply in the pipeline and it's easy to see rentals are going down.

[Rocket science?]

Seems a lot of people wish rents were going down. If in doubt check out the facts at the URA.

Lot of tenants here who of course want lower rents - kind of obvious no?   

[Cruncher]

There are various hard facts reported in various places: there are 60,000+ new condos due to be built over the next three years. However, planned net inflows of foreign workers is greater than 60,000+ according to population planning. OK, so demand and supply may be balanced by number alone. However, I have not seen any analysis on what rental rates the market can bear. All these new workers are working where? The IRs? Universal Studios? Manufacturing? Construction? Cleaning? Finance? How many can afford big rents?
The last few years have been somewhat an anomoly for real estate in my opinion: developers paying premiums to enblocs which removed supply and - at the same time the hype played up the F1 and IRs and the government opened the door to immigration and population growth - pushed up prices quickly. It is going to be interesting to see what happens between now and 2013.

[Nail on the head.]

Cruncher makes some really good and sensible points. There seems to be a glut of high-end accomodation and a shortage of more affordable stuff.

[You are not alone]

There are various hard facts reported in various places: there are 60,000+ new condos due to be built over the next three years. However, planned net inflows of foreign workers is greater than 60,000+ according to population planning. OK, so demand and supply may be balanced by number alone. However, I have not seen any analysis on what rental rates the market can bear. All these new workers are working where? The IRs? Universal Studios? Manufacturing? Construction? Cleaning? Finance? How many can afford big rents?
The last few years have been somewhat an anomoly for real estate in my opinion: developers paying premiums to enblocs which removed supply and - at the same time the hype played up the F1 and IRs and the government opened the door to immigration and population growth - pushed up prices quickly. It is going to be interesting to see what happens between now and 2013.

Cruncher I completely agree with you, but unfortunately this bubble can continue for quite some time.  The fundamentals completely do not support this market but I expect prices to keep inching higher until it inevitably crashes.

Sadly many lives will be ruined when this bubble does burst.  Those agents who are encouraging everyone to "buy buy buy" don't care that people are investing all their life savings and retirement funds in these tiny condos. 

[Abomination]

I see it this way.

In my parents generation only one person needed to work to pay off an average mortgage. Now  two people are required (of course some of the modern trappings of life are to blame.....not long ago people only had one TV and a stereo...now people have multiple flat screen TVs, computers, IT gadgets, mobile phones, three cars, etc etc and it does eat into your salary).

Despite this there comes a time when you have to buy (most people do not relish the idea of renting their whole life). This makes them desperate and whether or not prices are high or deemed realistic they will buy. Not many people have the patience or grit to wait X number of years for a possible fall in prices...its not the weekly petrol cost fluctuations....Added to that is the stress of seeing prices continually rising which provokes the thought that "maybe its better to buy now and not in 5 years...".We waited 10 years for the so called bubble to burst and it didnt happen. Prices doubled....

I now have a 35 year mortgage on an average house in an average suburb in my country. It has me in tears as its taking most of my and my wifes salary but we don't have a choice and are basically waiting for a miracle. We don't even have kids yet ! 

Frankly its an abomination but can't complain as I have a decent salary and can't see any other way. Any suggestions would be great.

Oh...another example is a friend bought his apartment in partnership with another friend. Another mate who works in a bank took out a cash loan to pay a deposit on an apartment....he then took out a homeloan for the rest. Strictly against the rules but it was the only way for him.

[poi]

Elections are due in about 18 months time. The govt. will do it's best to keep the market stable during this period.
Don't worry about the high end market. Those market players can afford to lose it all. Many of them are not interested in investment returns. They just want to park their money here.
One very important factor supporting the market is "confidence". Many people(locals as well as expats) have great confidence in the govt. They think the govt. can do miracles. Of course that's not true. 

[Kubes.SG]

I agree with Poi.

The PAP will do whatever it takes to delay the looming property crash, until after the next election.  Who knows they may even tap SG cash assets to provide cash handouts to those in mortgage stress.  Unfortunately for them then cannot keep the interest rates artificially low forever.  There will be upward pressure this year as we see an easing of liquidity and tightening of monetary policy in most markets - even EU and the US.  It is already started in AU.

This is a massive test of the maturity of the SG Govt and its MAS muppets.  Do they have the balls to do the right thing for SG and create some slow and gentle pain to gently deflate, or are they greedy and stupid and maintain, even inflate, the bubble until after the election, and massively increase the risk of a major bust.

I think the greedy and stupid approach will prevail.