Hold, and then buy

In a surprise announcement by the Government, private property prices are set to be controlled once again (the last measure implemented in Sept last year).

This time, after repeated re-iteration of the highest-in-history government land sales being put available, they will be 'curbing speculation' by reducing the limit on all private home loans to 80% and imposing a Seller Stamp Duty.

Well, we are not so interested in these measures per se and whether they are applicable, but we are more interested to get the answer to an age-old question: Is it STILL time to buy?

Two ways to go about interpreting.

First, the government is sending a clear message that property prices must not be allowed to rise much quicker than the pace of the overall economic recovery. And if it still does, more measures are coming in fast. Prices are therefore still set to moderately.

Second, the government KNOWS prices will shoot through the roof in the near term, and are therefore doing all they can now to prevent a huge fallout subsequently, and meanwhile get some revenue through the additional seller's stamp duty (which might just be the case given our budget deficit last year and this year's projection).

Let's ask ourselves why prices will continue rising. After all, the property market has always been a follower of the stock market, and the latter is definitely not doing very well recently.

There is optimism in the economy. But for how long? Already news of bubbles due to burst are popping out in Hong Kong and China. With US still picking up its pieces and the PIIGS of Eurozone in debt, how long more can we continue to deceive ourselves that EVERYTHING is fine?

Sure, lets talk about a more immediate cheer in our national context. Growth forecasts were raised to up to 6.5% and we have two IRs opening, which is supposed to generate many jobs, attract many high rollers to further boost our property market.

Nevertheless, we are a very open economy and we depend a great deal on other world players in almost all our markets. Significant population growth, coupled by commendable economic growth since independence has been the recipe for our mindsets that "our house prices will always increase in the long term".

But will this continue to hold true now that the government is stepping its breaks on its migration policy and focussing on increasing productivity instead? We can always succeed and produce more but one household will only need (and I mean the strict definition of a need) ONE home. Where is all the demand going to come from for our "investment properties"?

RWS Sentosa has already opened, and MBS will open some time around the 2nd quarter. Taking all things into consideration, I predict a slight dip in property prices and volume in March before rebounding when interest in the market returns when MBS opens.

In conclusion. HOLD now, BUY in March. After that, good luck.