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     FrontPage Edition: Thu 10 Nov 2005

Recovery of the Property Market


An Excerpt
In 2004, prices of private housing began to stabilise after 4 consecutive years of decline. In 2004 and the first half of 2005, prices increased by an average of 0.4% per quarter.
After the July policy changes, prices rose by 1.2% in 3Q2005, the highest increase in a single quarter in the past 5 years.
In tandem with the recovery in prices, demand for private housing has also improved significantly. For the past 2 years, about 1,200 new units were sold per quarter.
Demand started to pick up in 1H2005, with 1,900 new units sold per quarter. In 3Q2005 after the policy changes, demand continued to put up a strong showing with 2,200 new units sold.
The property market recovery is not confined to the private housing sector. All the other sectors of the property market are recovering in tandem with the strong growth of our economy.
HDB resale market prices stabilised in 3Q05, decreasing marginally by 0.4% compared to the 4.8% decline in the 2nd Quarter, which was triggered by the introduction of anti-cashback measures in April 2005.
Cashback practices had artificially inflated HDB resale flat prices, and flat buyers in cashback scams were eroding their CPF savings and taking on higher financing risks. The anti-cashback measures have since helped to restore prices closer to their actual levels.
In the office sector, the vacancy rate has fallen from 17.9% at the end of 2003 to 13.4% in 3Q2005. In the shop sector, the vacancy rate has decreased from 9.8% in 1Q2004 to 8% in 3Q2005 as retail sales increased. In the hotel sector, the average occupancy rate improved from 76% in Dec 2003 to 85% in Sep 2005 with increased tourist arrivals.
Last month, the consortium that was awarded the Business and Financial Centre site took up 244,000 sqm of space for the 1st phase of the project, almost 2.5 times higher than the minimum 100,000 sqm required. This is another indication of increased confidence in the property market.
Property Market Reflects Economic Fundamentals
All sectors of the property market are showing signs of improvement at the moment. However, whether the recovery can be sustained will depend on several fundamental factors, including the performance of the economy as a whole, the supply and demand situation, financial liquidity and interest rates and the external environment.
The overall economy has been doing well. According to MAS, GDP growth for the whole of 2005 is likely to be at the higher end of MTI¡¯s growth forecast of between 3.5% and 4.5%.
In 2006, Singapore¡¯s GDP is projected to grow by another 3% to 5%. Robust growth in the manufacturing, tourism and financial sectors, and the diversification of our economy into new areas like the life sciences, education and health, are helping to drive growth in our economy.
Externally, regional economies such as China, India and the ASEAN countries are all enjoying good economic growth. As their trading and investment partner, Singapore will benefit from the growth in the region.
All of this has translated into job opportunities on the ground. About 78,000 new jobs were created in the first 9 months of 2005. This pace of job creation is the highest recorded since the economic boom of 2000.
With more new jobs created, the unemployment rate has also improved from 3.4% in June 2005 to 3.3% in September. Initial fears that the economic recovery would be a jobless one have been unfounded.
The improvement in the property market is thus backed by economic fundamentals of rising demand, income and jobs. If the overall economy continues to do well, the recovery in the property market is likely to be sustained.

Full Text of Speech

Source: Media Release 7 Nov 2005

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