The Singapore Story - c.ymcdn.comc.ymcdn.com/sites/ file• New sale, resale and subsale ... 49,601 (24%) condominiums are located in Prime postal districts of 9,10 & 11 ... Foreigner

The Singapore Story

Yang Liang Chua, PhD

Head of Research South East Asia,

Head of Research & Consultancy, Singapore

Jones Lang LaSalle

1

2

• Property Price Index increased by 0.6% in 1Q13, a

marked slowdown from the previous quarter’s 1.8% • Driven by the OCR which expanded at 1.4%, lower

than the 3.8% in 4Q12

• New sales volume in 1Q13 is about 3,405 units

compared to 4,373 units a year ago and 3,739 in

4Q12

• Foreign buyers, including PRs decreased island-

wide • Islandwide: down 5% from 1Q08 in 1Q13, (140%)

• Prime market: down 32% from 1Q08 in 1Q13, (60%)

Key Trends

3

• Gap between high end and mass market

prices all time low of 41% • Driven by the OCR expanding since 4Q12

while CCR has been declining

• Total sales volume in the market has

cooled off to 3,699 in 2Q13 from 5,460 in

1Q13 • New sale, resale and subsale volume have

fallen q-o-q between 27% and 54% and is

below their respective 5 year averages

Key Trends

1. Residential Demand : Need or Want?

2. Where are we heading?

3. Pro-population economic growth strategy

4. Impact on Real Estate

4

5

Singapore Residential Market

Private

22%

Public

78%

5.31 million people living in Singapore

1 out of 4 is a foreigner

1.2 million housing units island-wide

916,842 (77%) public housing units

270,620 (23%) private housing units

Source: Jones Lang LaSalle Research, DOS, HDB, URA

6

916,842 public residential units

853,772 (95%) sold units

48,199 are rental units

6 apartment types (1-5 rooms and executive)

Public Housing

7

277,620 privately owned residential units

70,388 (25%) are landed homes

207,232 (75%) are non-landed homes i.e. apartments/condominiums

49,601 (24%) condominiums are located in Prime postal districts of 9,10 & 11

Private Housing

8

Need or want?

9

Housing growth has lagged population by 1.25times

Private housing grew

44% since 2000

Foreigner population

increased by

98%

since 2000

Public housing

grew only

15%

Resident population increased 17%

10

Number of people per housing unit has increased

Average household size in

2000 = 4.2


2012 = 4.4

Source: Jones Lang LaSalle

The average household size here includes non resident population

11

Housing stock off-balance since 2007


12

Hard Policy Era (1995-2005)

Few but hard policies

Soft Policy Era (2006-2012)

Several but soft policies

13

Recent Anti-Speculative Measures

1,723

2,772

0

50

100

150

200

250

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Jun

-07

Jul-

07

Au

g-0

7Se

p-0

7O

ct-0

7N

ov-

07

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Ap

r-0

8M

ay-…

Jun

-08

Jul-

08

Au

g-0

8Se

p-0

8O

ct-0

8N

ov-

08

Dec

-08

Jan

-09

Feb

-09

Mar

-09

Ap

r-0

9M

ay-…

Jun

-09

Jul-

09

Au

g-0

9Se

p-0

9O

ct-0

9N

ov-

09

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0M

ay-…

Jun

-10

Jul-

10

Au

g-1

0Se

p-1

0O

ct-1

0N

ov-

10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1M

ay-…

Jun

-11

Jul-

11

Au

g-1

1Se

p-1

1O

ct-1

1N

ov-

11

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Ap

r-1

2M

ay-…

Jun

-12

Jul-

12

Au

g-1

2Se

p-1

2O

ct-1

2N

ov-

12

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Ind

ex

No

. of

Un

its

URA Property Price Index

Monthly Sales

Monthly Launches

Average monthly sales in 1H08 – 390 units

Lehman Brothers Collapses

Average monthly sales in 1H09 – 1,229 units



Jun 22, Public consultation on the Income Tax Amendment Bill

Sep 14, Removal of Interest Absorption

Scheme and Interest Only Loan

Nov 6, Confirmed List

and Nov 9, MAS Financial

Stability Review

Feb 20, Introduction of Seller’s Stamp

Duty and lowering of LTV

Aug 30, Modification of SSD; Increase minimum cash payment and

lower LTV for buyers with outstanding

housing loans

Jan 13, Increased holding period for imposition of SSD,

raise SSD rates, lower LTV limit to

non-individual buyers and to

buyers with 1 or more outstanding

housing loans

Jul 18, revision of DC to 70% of

land value

Dec 12, introduction

of ABSD


Jan 12, Across the

board Increase of

5-7% for ABSD rates


14

ABSD increased by 5-7% and

affecting Singaporean’s 2nd

purchase and PR’s first purchase

Latest ABSD Measures on 12 Jan 2013

Cash dp raised from 10 to 25% for second or subsequent

loans

15

Where are we heading?

16

With low population growth, housing stock growth

could exceed population needs


21% since 2012


increased by

0%

since 2012

Public housing

grew only

9%


17

By 2015, with low population growth, the number of people

per housing unit will drop


2000 = 4.2


2015 = 4.0



Ageing population and shrinking demographic dividend

0

50

100

150

200

250

300

350

0 - 4 5 - 9 10 -14

15 -19

20 -24

25 -29

30 -34

35 -39

40 -44

45 -49

50 -54

55 -59

60 -64

65 -69

70 -74

75 -79

80 -84

85 &Over

Total (2010) Total (2015) Total (2020) Total (2025) Total (2030)

18

Source: Census 2010, Jones Lang LaSalle

Economic growth and demographic dividend

• Demographic dividend is the condition where the growth of the

economically active cohort exceeds those in the dependent cohort –

less than 15 years and older than 65 years Positive impact on

economic growth higher income per capita

• Low fertility (below replacement) potentially challenges the future

economic growth as economically active cohort will shrink and

dependency ratio could rise

19

Age dependency ratio in Singapore is low compared to

other countries

UK, 51.41

JP, 56.36

SG, 35.91

HK , 31.98

US, 49.56

0

10

20

30

40

50

60

70

80

90

100

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010 N

o o

f D

epen

den

ts t

o 1

00 w

ork

ing

ad

ult

s

20


0

10

20

30

40

50

60

70

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2020

2030

GDP per capita S$ Age Dependency Ratio (RHS)

Rising dependency ratio could drag economic growth

21

Dependency ratio: No of dependents (<15 & >65) to every 100 working adults (15-64)

?


Economic growth and demographic dividend Ratio of workforce exit to entry to rise

Continual economic growth

requires a sustained size of

economically active cohort:

• Raise productivity

• Encourage fertility

• Delay retirement age

• Import labour

22

0

500

1,000

1,500

2,000

2,500

3,000

<15 15-65 >65

Pop, ‘000

2010 2015 2020 2025 2030

2010

• 0.42

2015

• 0.75

2020

• 1.08

2025

• 1.45

2030

• 1.64


23

Pro-population economic growth strategy

Pro-population economic growth strategy

• Singapore needs to adopt a pro-population economic

growth strategy given the fertility rate is below the

natural replacement level

• Increase the economically active population by

delaying retirement, encouraging female participation,

immigration and prevent this demographic dividend

from shrinking too aggressively

24

Meeting the basic

• The economically active cohort will shrink by 10% by 2030 based on

natural birth and death rates

• Maintaining the dependency ratio of 35 per 100 working adults, we

need on average 40,000 to 100,000 new residents per year

25

0.5

0.55

0.6

0.65

0.7

0.75

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

15

20

20

20

25

20

30

Proportion of Economically Active Cohort to Overall

Population

Demographic Dividend


26

Housing stock could match population size by 2015


21% since 2012


increased by

15%

since 2012

Public housing

grew only

9%


27

Average household size could maintain


2000 = 4.2


2015 = 4.2



4.4

4.2

3.4

3.6

3.8

4

4.2

4.4

4.6

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Household Size

No. of People (mil)

Total Physical Stock Total Population Average Household Size (RHS)

28

Maintain 2010 dependency ratio of 35, housing market likely to

maintain equilibrium by 2015

Source: Jones Lang LaSalle Research, May 2013

4.4

4.0

3.4

3.6

3.8

4

4.2

4.4

4.6

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Household Size

No. of People (mil)

Total Physical Stock Total Population Average Household Size (RHS)

29

Limited population growth could result in surplus housing in 2015


Property price depends on balance between

population and economic growth rates

30

0

50

100

150

200

250

-140,000.00

-120,000.00

-100,000.00

-80,000.00

-60,000.00

-40,000.00

-20,000.00

0.00

20,000.00

40,000.00

60,000.00

80,000.00

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f

Index Housing Units

Annual (ST) Balance of Housing Stock Cumulative (LT) Balance of Housing Stock URA Islandwide PPI (RHS)

Averaging 1.3-1.5% per year


Population assumption is a long term planning

parameter and not a target

Year Concept Plan

Released

Population Then Population assumption in the

prevalent Concept Plan

1971 2.0mil 3.4million in 20 years

1990 3.0mil 4.0million in 25 years

2000 4.0mil 5.5million in 40-50 years

2012 (Population White Paper) 5.3mil 6.5-6.9million in 8-18 years

31

• Population has always been a parameter to guide infrastructural and

urban planning processes

• Not an immigration target

32

Impact on the real estate

Real estate is a derived demand

Driven fundamentally by

• Population growth

• Economic growth

33

34

Hong Kong



35

Real estate is a derived demand London


36

New York



Population and urban growth

• Recent studies showed:

– China, the Philippines and Singapore: population growth

supported economic growth

– Malaysia and Hong Kong : economic growth caused population

expansion

– Taiwan and Indonesia: no evidence linking population and

economic growth

• Growth of cities have historically been supported by the

rural-urban migration

37

Population Growth & the Property Markets Increased demand across all asset classes

Population

PMETs

Real Estate

Assets

Residential

Office

Industrial

Retail

50% growth in number of

PMETs

Increased demand for housing

38

• Population white paper also calls for a restructuring of economy

• PMET jobs to grow from 850K 1.25mil by 2030

• Ratio of PMET to non-PMET to rise from 1 to 1.47 suggesting that demand for housing types will change – rising aspirations

Understanding the changing needs of a mature city

• Need to understand the housing preference of a new generation as

the population and city matures

• Higher expectations need for varied housing forms

• A need to also understand the bi-directional relationship between the

city and the hinterland

• Recent findings affirms this bi-directional relationship i.e. the

hinterland’s function is not only a provider of low cost resources

(including labour) but also a buffer environment where urban dwellers

could migrate to after having spent their productive years in the city.

39

The hinterland and its hidden value

• Hinterland provides firms and households with a lower cost environment

• Growth of the city is pivotal on the availability of such lower cost resources – rural

urban migration

• As metropolitan area matures, it becomes the engine for outward growth in the

hinterland – urban-rural migration

• Quandary for Singapore

– Policies support the outflow of firms into the “hinterland” but can’t do the same for

households

– Singapore households in the lower income bracket cannot simply follow the jobs and

relocate to cheaper alternative accommodation

• This urban-hinterland household churn is slower and more difficult in Singapore

and has implications on the pro-population economic growth strategy

40

1. Residential Demand : Need The stock and population mismatch

2. Where are we heading?

Ageing, dragged by low fertility rate

3. Pro-population economic growth strategy

Population assumption is a long term planning parameter

4. Impact on Real Estate

The bi-directional relation between hinterland and city

41

42

Thank you

Documents

The Singapore Story - c.ymcdn.comc.ymcdn.com/sites/ file• New sale, resale and subsale ... 49,601 (24%) condominiums are located in Prime postal districts of 9,10 & 11 ... Foreigner