Mixed  views  on  property  market conditions. During our discussion, some mixed views on the property market conditions were provided. On one hand, some investors expect the property markets to remain soft going forward; on the back of large supply of government housing  coming  on  to  the  market  in  two  to  three  years.  Concurrently,  there  were  also speculations  that  property  prices  will  continue  to  rise  amid  a  prolonged  low  interest  and high  liquidity  environment,  allowing  properties  to  remain  affordable  to  the  general  public. However, it is of consensus view that although sentiments of the property continue to hold up at this moment, it could change very quickly if more government measures targeting at the residential sector are released or if there is a sudden hike in interest rate.

Investors continue to remain cautious amid rising vacancy rate. During the meeting, it was further concurred that although Singapore government has not 'over-regulated' on the residential  segment,  investors  continue  to  remain  cautious  amid  uncertain  factors  going forward. In part, this worry was built on the fact that the HDB resale flat prices increased by 2.0%  in  3Q12  (largest  increase  since  3Q11)  despite  a  strong  forecasted  supply  coming through over the next two years (estimated at 20,000 and 26,800 units in 2013 and 2014 respectively). In addition, as the number of PR taper off amid tighter immigration policies, coupled  with  rising  supply  of  HDB  flats  in  the  coming  years,  demand  for  public  housing could  come  under  pressure  going  forward.  This  concern  is  further  backed  by  a  rise  in vacancy rate in private residential from 4.9% in 2Q11 to 6.1% in 3Q12.  

Pressure  from  rising  wages  among  low  income  bracket  workers.  Another  concern raised  during  the  meeting  was  the  issue  of  rising  wages  amid  the  lower  income  bracket workers.  As  wages  continue  to  rise,  developers  indicated  that  their  margins  have  been squeezed.  In  addition,  restaurants  and  SMEs  have  similarly  suffered  as  a  result  of  rising wages; which in turn is starting to have an adverse effect on the topline of developers that have leased their properties to these businesses, as some of them start to fail as a result of unsustainable running cost. 

Source: OSK