The beginning of year 2008 beckons in a tumultuous period for the Singapore stock market. After climbing peak after peak in the previous year, the Straits Times Index (STI) has slowed down visibly. In the last week of January, there were even one or two heart-stopping moments when the index fell fast and drastically below its 3,000 support level. We at Singapore Prime Districts understand that shaky performance in the stock market could be a concern for real estate investors. In this article, we will reveal why recent quivers of the STI should not scare off potential buyers and sellers of property.

Disconnection between shares and property transactions

Our data shows that there is a general disconnection between performance of the stock market and the prices of properties. Even when the Singapore stock market closed at its lowest point in 5 months on 15th January, there was no sign of panic and distress reflected in the property market. Prices remain stable and demand from buyers is still going strong, particularly for condominiums in niche areas of the island. In fact, soon after that steep dip in the market, two projects namely Casa Fortuna at Balestier and Wilkie 80 at Wilkie Road were launched and both sold out within 3 days. The disconnection between shares and demand for property remains stark even if we examine specifically property stocks and property counters. The performance of these property-related shares in the market do not mirror or affect transactions of property in real life. Property counters in Singapore have dropped by 60% from their high points in the past year but so far, housing prices have not shown signs of softening. For the stock market to influence property prices, it must fall convincingly for a prolonged period. Yet, the STI is only going through minor corrections. Therefore, we believe its recent ups and downs would hardly affect the local property market and should not cause investors to worry too much.

Property is a long term investment

Furthermore, property investments are of a long term nature that depends on various factors. The rising and falling of stock markets however, is usually a short term phenomenon. Such occurrences if not proven to be extremely drastic could not change the optimistic outlook of Singapore's economy, which should be the number one concern of the rational investor. The robust health of our economy combined with specific booms in the finance and construction industry has led the Economist to name Singapore as an anomaly. As a developed country, our growth rate in year 2007 after adjustment for inflation was a whopping 8.9%, a figure only imaginable in developing countries like China and India. This kind of growth is not a once-off event. Local policymakers are fairly confident that despite the credit crunch in the US, we will reach targeted growth of 6.5% later this year. Such growth figures should dispel any fear generated from the shaky stock market because an overall strong performance of the economy influences property prices far more directly than the stock market does. Also, this would mean more expatriates would pour into Singapore and create a demand for high-end living space. All this should serve as valid assurance to potential property investors.

Sub-prime mortgage woes

Some sensitive investors fear that the bad performance in Singapore's stock market will be exacerbated and prolonged by the sub-prime mortgage woes in the states. Even worse, America would fall into a recession and affect small Asian nations like Singapore. We at Singapore Prime Districts have observed economic reports closely and we believe that such panic is unnecessary. Firstly The US government will not sit and do nothing about their problems in the housing market. Just recently, the Federal Bank has announced to cut interest rates by a generous 0.75% to relieve the burden of debt. On top of that, the Bush administration would give a handsome payout of USD$150 billion to consumers and businesses to encourage spending and in turn boost the economy. These measures would stabilize the housing market and more importantly, calm Wall Street and Main Street. Once this is achieved, the Singapore stock market should be quite safe from severe and continuous falling reminiscent of the 1997 Financial Crisis. Secondly, the Singapore stock market is not entirely reliant on Wall Street. Increasingly, performance in China and India could help to maintain local share prices because these Asian economies are building closer ties with us. In the worst case scenario of a meltdown of the American economy, the impact on the STI can be cushioned by strong Chinese and Indian indices.

In conclusion, we at Singapore Prime Districts would advise property investors in Singapore to remain calm and not to be too alarmed by the recent dips in the stock market. Ultimately, we should invest in property with the hope of stable long term returns. The economic outlook for Singapore in the long run is full of promise and short term corrections of the STI would find it hard to dampen spirits.