I totally forgot that I wrote about this way back in 2011.

Back then, I found a chart that showed the relationship between six categories of property in Singapore. From the chart, it seemed that a bottom for the property market (aka ‘A good time to buy’) is whenever prices of private property come back down to levels where public housing is.

SG ppty valuation

Chart that I found on Valuebuddies way back in 2011

 

Of course, you’ll never (or never say never?) see the actual amount for a private property get to the level that a HDB* flat is selling for. For example, suppose a condominium is selling for S$1 million, we wouldn’t expect a similar sized HDB flat, located in the same area to be selling for the same amount. In the event of a downturn, we would expect to see prices of both apartments fall but the fall in HDB flats is usually to a lesser extent.

So, how would private apartments come down to the level? Well, the chart above uses an index to calculate the price level for each category of property. If you ever took an economics class in college, you would have learned about the consumer price index (CPI) which tracks inflation by comparing to some value that is used as a point of reference. The exact same thing is going on in the chart above.

That chart was from back in 2011. So I think the more important question is, how has the property market changed since then? Unfortunately, I couldn’t get my hands on the same dataset. No matter how hard I looked, there isn’t data broken down into that many categories. Fortunately, I found some data for ‘private non-landed’, ‘private’ and ‘HDB flats’. The cool thing about the data I found is that the data is also presented as an index, with Jan ’09 pegged as the base year (the anchor reference point) and with that, I have a chart updated with values up to Nov 2016.

 

sg_propertymkt

Property Market Index (updated Nov 2016)

 

There are some interesting observations.

First, the bottoms in this chart match the bottoms of the chart above. So, despite there being possible differences in the construction of the index, both charts show that ’99 and ’09 were bottoms in the Singapore property market. Which means that I can trust this new dataset.

Second, private property prices now are obviously way, way overvalued relative to HDB flats. One reason I can offer is that since 2011, the massive government program to build tons of HDB flats for local, first-time home buyers has helped to keep prices of HDB flats relatively affordable. However, this has obviously segmented the market greatly- HDB flats for those who need a place to stay while investors who still see value can go on and purchase private property.

Third, we obviously haven’t seen a very bad economic downturn yet. Otherwise, prices would have dropped like a rock as evidenced by 1999 or 2009.

Fourth, this is further proof for me that if you’re looking for a roof over your head, there is no better value than a HDB flat. Prices don’t fall as much in bad times and even in times of overvaluation, you can still get one for a decent price and be sure that you won’t be overpaying that much for it.

I know that within the private non-landed segment, there are further sub-divisions based on which part of the island we’re looking and it could be that there are pockets of value appearing in regions where prices have dropped the most.

I’ll elaborate more on this in another post but as it is, it doesn’t seem like a very good time to purchase a private property in Singapore.

 

*HDB flats are the Singapore model of public housing apartments. Relative to other parts of the world, public housing in Singapore can be very, very decent and something like 85% of the local population live in HDB flats.

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