Issue 244

Copyright 2011-2016 www.propwise.sg. All Rights Reserved.

CONTENTS
p2

FROM THE

EDITOR

Singapore Interest Rate Outlook for

Welcome to the 244th edition of the

Singapore Property Weekly.

2016 and Beyond

Hope you like it!

p11

Singapore Property News This Week

p13

Resale Property Transactions

Mr. Propwise

(January 6 January 12)

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SINGAPORE PROPERTY WEEKLY Issue 244

Singapore Interest Rate Outlook for 2016 and Beyond

By Paul Ho (guest contributor)

In Singapore, the Sibor (Singapore Interbank
Offer Rate) seems to be highly correlated to
the US Federal Reserve Target Funds Rate.
Hence, we tend to watch the US Federal
Reserve to get clues on where mortgage
interest rates in Singapore are heading.
In August 2015, we forecasted that at a rate
of a ~0.1% drop per month, by November the
unemployment rate should fall below 5% and
the Fed may be tempted to raise the Fed
Funds target rate by 0.25% to 0.5% as a
precautionary measure.

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SINGAPORE PROPERTY WEEKLY Issue 244

In December 2015, the US unemployment
rate dropped to 5% and the Federal Reserve
raised the Federal Reserve overnight funds
rate from 0.25% to 0.5%.

Chart 1: US Unemployment rate versus US

Disposable personal income per capita
(TradingEconomics, US Bureau of Labor
Statistics, iCompareLoan.com)
Back to Contents

The unemployment rate which is at 5% in Dec

2015 looks to be on a downward trend while
disposable incomes are rising. Economic and
political pressures are building up for wage
growth in 2016. 13 US states are raising
minimum wages (Source: CNBC).

Chart 2: Percentage change in wages, 2014

Nov 2015. Bureau of Labor Statistics

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SINGAPORE PROPERTY WEEKLY Issue 244

The US Federal Reserve will watch keenly
whether the economy is over-heating and
causing inflation, and if so will raise interest
rates to cool it down.
Labor tightness contributes to inflation, while
import price drops is disinflationary. However,
personal consumption is 68.83% of the GDP
as at November 2015, hence rising
disposable incomes would likely lead to
inflation, while oil price may recover in 2016,
increasing inflationary pressures.

Back to Contents

Chart 3: US Import Prices, Jan 2014 to Jan

2015, Bureau of Labor Statistics

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SINGAPORE PROPERTY WEEKLY Issue 244

The rest of the world is largely in a
deflationary environment and this has caused
US import prices to dip, further aided by the
strengthening US dollar. Oil import prices
have dropped, playing a larger part in the
drop of aggregate US import prices, leading
to low inflation in the US in 2015.

Interest Rates in Major Economies

Is the world headed for recession? We can
look at the respective regions interest rates
as an indicator.

Economies Dec 2015, TradingEconomics

Euro Area interest rate is flat at 0.05%, the
lowest ever. Chinas 1-year benchmark
lending rate broke a new low at 4.35% and
Japans interest rate is 0%. This indicates
weakness in the economic outlook in Europe,
China and Japan. In the case of the Euro
Area and Japan, interest rates cannot drop
anymore, hence monetary easing is
implemented to try to create inflation.
Euro Area, China, Japan and United States
make up about 65% of the worlds economy
at about USD18 Trillion, 10 Trillion, 4.6 Trillion
and 17 Trillion respectively. The United
Stateslooks to be recovering while the rest of
the world struggles with slowing economic
growth.

Chart 4: Interest Rates in the 4 Major

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SINGAPORE PROPERTY WEEKLY Issue 244

Impact of Singapores Open Economy and
Price Stability
Singapore is an open economy where trade is
more than 250% of its GDP.

With such huge imports and exports, this

means that domestic policies, money supply
and interest rates have a lesser impact on
inflation than the exchange rate.
A stronger Singapore dollar will lead to cheaper
imports and lower inflation but costlier exports,
while a weaker Singapore dollar will lead to
higher inflation (due to higher import prices) but
potentially higher exports.

Chart 5: Selected countries Trade as a

Percentage
of
GDP,
Worldbank,
www.iCompareLoan.com

Back to Contents

However, higher interest rates do not severely

impact the manufacturing sector as Singapores
manufacturing sector consists of larger
companies which can largely self-fund their
expansion or transfer funds from their
headquarters. Interest rates affect property
developers more.

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SINGAPORE PROPERTY WEEKLY Issue 244

MAS has observed that the USD Sibor (3m)
and SDG Sibor (3m) track each other closely,
hence the high correlation between US
economy and that of Singapore. Moreover,
due to Singapores role as an international
financial centre with an open economy, small
changes in the difference between domestic
and foreign interest rates can lead to large
and quick movements of capital. (Source
MAS). A negative capital account indicates
capital outflow and is generally undesired,
unless the outflow is due to investments
overseas.
MAS Monetary Policy stance Gradual
Appreciation of S$NEER policy band
For Singapore, monetary policy means
exchange rate policy. In the past, MAS has
adopted a Gradual Appreciation of the
S$NEER (Singapore Dollar Nominal Effective
Exchange Rate) policy band. Singapores
Back to Contents

weak economic growth meant that MAS has

to change its policy stance to Gradual
Appreciation of the S$NEER policy band.
However, the rate of appreciation will be
reduced slightly.
This simply means we will still continue to
maintain a strong currency, but will reduce the
rate at which the Singapore Dollar becomes
stronger.
Because of Singapores open economy, small
change in US interest rates as well as that of
Singapores major trading partners can lead
to large and quick movements of capital.
Hence the US Federal Reserve interest rates
hikes will lead to Singapore interest rates
rising in tandem.
Singapores use of the S$NEER means that
Singapore will weigh its currency appreciation
against the trade-weighted basket of
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SINGAPORE PROPERTY WEEKLY Issue 244

currencies. This likely means a slight
depreciation against the USD and HKD and
slight appreciation against its major trading
partners, given their current economic
weaknesses.

to the Singapore dollar appreciating against

the US dollar. Funds are willing to bear with
negative interest rates in view of an
appreciating currency.

When there is weakness in the economy, a

country cannot artificially maintain a strong
currency stance unless it has huge foreign
reserves to defend itsstance, or it may open
up arbitrage opportunities to currency
speculators such as George Soros. Hence
Singapores adjustment of its policy stance is
the right policy as it removes any potential
mispricing.
The day SOR went negative

On 17 Aug 2011, the Swap Offer Rate (SOR)

went negative. This was to stop the flood of
US dollars coming into Singapore dollar due

Back to Contents

Chart 6: Sibor Interest

iCompareLoan.com

Rates,

ABS,

When a currency depreciates, the opposite

happens. Interest rates will rise to mitigate the
outflow of funds.
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SINGAPORE PROPERTY WEEKLY Issue 244

Summary and mortgage interest rate forecast
for 2016 to 2018
The Federal Open Market Committee (FOMC)
forecasted the median fed funds overnight target
rates for 2016 at approximately 1.5%, for 2017 at
approximately 2.75%, and for 2018 at around
3.5%, with a longer run interest rate from 3.25%
to 3.5%. If these forecasts were to hold true,
these will similarly exert upward pressure on
Singapore dollar Sibor overnight rates.
A typical US economic recovery runs for several
years while Singapore is just entering a
weakening economic cycle which could last two
to three years. Singapores largest trading
partner China is also entering a slower growth
phase while its second largest trading partner
Malaysia is also slowing down.

Back to Contents

Chart 7: Federal Open Market Committee

(FOMC) participants forecast

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SINGAPORE PROPERTY WEEKLY Issue 244

An overall slight and gradual appreciation of
the S$NEER policy band, means that the
Singapore dollar will have to find the tradeweighted middle ground which is slightly
on the appreciation side. Given that the US
is recovering and the rest of the world is
largely slowing down, this means that the
Singapore dollar will slightly appreciate
against many currencies while slightly
depreciating against the US dollar.
It is hard to predict the future, but based on
the
current
data,
iCompareLoan.com
forecasts:

2016: Sibor (1m) to be in the range of

1.4% to 2%

2017: Sibor (1m) to be in the range of

Back to Contents

1.9% to 2.5%

2018: Sibor (1m) to be in the range of

2.4% to 3%

2019 and beyond: Sibor (1m) to be in the

range of 2.4% to 3%

By Paul Ho, holder of an MBA from a

reputable
university
and
editor
of
www.iCompareLoan.com, Singapores first
Cloud-based Home Loan reporting platform
used by Property agents, financial advisors
as well as Mortgage brokers.

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SINGAPORE PROPERTY WEEKLY Issue 244

Singapore Property This Week

Residential
Q4 2015 HDB resale prices up by 0.1%
For the first time in 10 quarters, resale prices
of HDB have risen by 0.1% quarter on quarter
in Q4 2015. Ismail Gafoor from PropNex
believes that resale prices have already hit its
lowest in Q3 last year. Nonetheless, he
predicts that resale prices will continue to be
flat in 2016. More buyers are expected to
enter the market as cooling measures remain
in place. Also, as HDB resale prices fall,
homeowners may be less willing to upgrade
to private properties, said Ismail Gafoor.
Eugene Lim from ERA Realty believes that
the market could have found its support level
as there is increased price stability. However,
Back to Contents

Lim warns that with higher interest rates and

a slowdown in the economy, it may be too
early to say that the market has recovered.
(Source: Business Times)
GCB at King Albert Park sold for $25
million
A good class bungalow (GCB) along King
Albert Park has been sold for $25 million or
$1,493 psf based on a land area of 16,750 sq
ft. The bungalow which is freehold, consist of
two storeys and a swimming pool. It has a
built-up area of about 10,000 sq ft and was
completed in 2012. Currently, the bungalow is
tenanted.
(Source: Business Times)
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SINGAPORE PROPERTY WEEKLY Issue 244

Foreign buying falls as property sales
plunge
According to the Business Times, foreigners
have cut their purchases of private homes in
Singapore, leaving the market to depend on
local buyers at a time when domestic interest
rates are increasing. Data by DTZ showed
that in Q4 of 2015, foreigners including
permanent residents have bought 499
homes, which accounted for 16% of the total
transactions made. In contrast, more than
30% of the transactions made in 2011 came
from foreign buyers. Alan Cheong from Savills
said that Chinese buyers may have been
more attracted to countries like Australia and
the UK. To remain competitive, Cheong
believes that stamp duties need to be
tweaked to retain buyer interest.
(Source: Business Times)

Back to Contents

Commercial
Office vacancy rate in 2016 expected to hit
double digits
In Q4 2015, office rents have fallen by 1.8%
while in Q3, office rents were down by 2.9%
quarter-on-quarter. In 2015, office rents fell by
a total of 6.5%, eroding most of the gains
achieved in 2014 when rents rose 9.8%.
Weak leasing demand, caused by a slump in
business sentiment, is expected to increase
vacancy rates. However, as office stock is
reduced during Q4 last year, the overall
vacancy rate held steady at 9.6%. Christine Li
from Cushman & Wakefield believes that as
more than 4 million sq ft in gross floor area of
office space is slated for completion in 2016,
vacancy rates will increase this year.
(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 244

Non-Landed Residential Resale Property Transactions for the Week of Jan 6 Jan 12
Postal
District
1
2
4
4
5
5
8
9
9
10
10
10
10
10
10
11
12
12
13
14
15
15
15
15
15
16
16
18

Project Name
THE SAIL @ MARINA BAY
INTERNATIONAL PLAZA
TURQUOISE
THE INTERLACE
PARC IMPERIAL
CLEMENTIWOODS CONDOMINIUM
CITY STUDIOS
THE CLAYMORE
LEONIE GARDENS
8 NAPIER
RV RESIDENCES
DUCHESS RESIDENCES
ASTRID MEADOWS
TANGLIN REGENCY
TULIP GARDEN
NEWTON ONE
BALESTIER POINT
CHELSEA GROVE
PLATINUM EDGE
THE ALCOVE
THE ESTA
EAST SIGNATURE
ONAN SUITES
JOO CHIAT MANSIONS
SERAYA COURT
BAYWATER
BAYSHORE PARK
MELVILLE PARK

Back to Contents

Area
(sqft)
667
1,604
2,153
1,259
398
560
474
2,680
1,733
2,013
678
1,464
2,745
850
1,701
2,411
1,119
1,970
1,055
1,324
1,001
1,001
818
1,238
1,841
1,302
1,173
958

Transacted
Price ($)
1,250,000
1,550,000
3,014,200
1,600,000
650,000
720,000
625,000
7,000,000
2,200,000
6,441,600
1,430,000
2,490,000
4,300,000
1,095,000
2,100,000
4,100,000
1,008,000
1,320,000
1,220,000
1,050,000
1,530,000
1,220,000
960,000
1,125,000
1,050,000
1,190,000
1,070,000
740,000

Price
Tenure
($ psf)
1,873
99
966
99
1,400
99
1,270
99
1,632
FH
1,286
99
1,320
FH
2,612
FH
1,269
99
3,200
FH
2,109 999
1,701 999
1,567
FH
1,288
99
1,235
FH
1,700
FH
900
FH
670
FH
1,157
FH
793
99
1,528
FH
1,219
FH
1,174
FH
909
FH
570
FH
914
99
912
99
772
99

Postal
District
19
19
19
19
19
19
19
19
20
20
22
22
22
23
23
23
23
23
25
26
27
27
28

Project Name
21 RICHARDS
PARC VERA
CHILTERN PARK
CHUAN PARK
RIO VISTA
BRIGHTON VIEW
EVERGREEN PARK
FLORENCE REGENCY
SEASONS VIEW
THOMSON VIEW CONDOMINIUM
THE LAKEFRONT RESIDENCES
PARC OASIS
PARC VISTA
HILLINGTON GREEN
THE MADEIRA
NORTHVALE
NORTHVALE
PARKVIEW APARTMENTS
ROSEWOOD SUITES
BULLION PARK
THE ESTUARY
EIGHT COURTYARDS
NIM GARDENS

Area
(sqft)
409
1,141
1,572
1,173
1,249
1,227
1,173
1,690
1,152
3,843
1,012
1,378
1,270
1,356
936
689
1,087
1,119
710
1,259
603
958
1,830

Transacted
Price ($)
650,000
1,100,000
1,325,000
900,000
955,888
900,000
830,000
880,000
1,096,000
2,500,000
1,280,000
1,246,000
1,050,088
1,300,000
870,000
620,000
830,000
795,000
620,000
1,200,000
613,000
900,000
1,570,000

Price
Tenure
($ psf)
1,589
FH
964
99
843
99
767
99
766
99
733
FH
707
99
521
103
952
99
651
99
1,265
99
904
99
827
99
959
999
929
99
900
99
763
99
710
99
873
99
953
FH
1,017
99
939
99
858
FH

NOTE: This data only covers non-landed residential resale property

transactions with caveats lodged with the Singapore Land Authority.
Typically, caveats are lodged at least 2-3 weeks after a purchaser
signs an OTP, hence the lagged nature of the data.
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SINGAPORE PROPERTY WEEKLY Issue 244

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