Following up on my earlier post “To Buy Or Not To Buy: The Truth About The Current State of Singapore Real Estate“, I would like to establish why I am generally swimming against the tide and going against the common perception of many other real estate consultants saying that the Singapore property market is heading down due to the global economic meltdown.
First and foremost, I honestly do not believe that we are facing a global economic crisis as bad as some sectors would want us to believe. The world used to revolve around the US and when the US sneezed, the world usually caught a cold. However, today things are quite different from some years ago; from Russia to China, India to Brazil and so on, there is a very huge growing middle class and hence a very large consumer market globally. The US may still be the largest consumer market as a nation, but we are now talking about a collective growing consumer market globally and I can see the US having a significantly lesser influence on the world economy; not to say that it does not have any effect on the economy at all.
“China’s middle class has grown from 65.5 million in January 2005 to 80 million in January 2007. It is forecast to expand to 700 million by 2020, driven by continued strong economic growth. The substantial and rising number of middle class with its growing incomes will transform the Chinese consumer market.”
Source: An Hodgson, Euromonitor Archive, 25 July 2007
http://www.euromonitor.com/Chinas_middle_class_reaches_80_million
Here is the forecast for another rapidly rising economic powerhouse, India:
“The middle class currently numbers some 50 million people, but by 2025 will have expanded dramatically to 583 million people—some 41 percent of the population. These households will see their incomes balloon to 51.5 trillion rupees ($1.1 billion)—11 times the level of today and 58 percent of total Indian income.”
Source: BusinessWeek, By Diana Farrell and Eric Beinhocker, May 19, 2007
http://www.mckinsey.com/mgi/mginews/bigspenders.asp
How does this affect the Singapore real estate market; you might ask? Well, the strong Asian economy driven by the economies of China, India, Vietnam etc are rolling unabated like a giant locomotive at full speed with over a billion people on board and a few hundred bald eagles desperately trying to stop it. Singapore has always been the HQ of Asia so to speak, and the Singapore government has been putting numerous initiatives in place to capitalise on this position. Singapore is trying to portray a very different outlook to attract the rich and famous from around the world by moving towards being a globalised country and in 2006, Singapore officially became the world’s most globalised nation.
Singapore is World’s Most Globalised Nation
Source: A.T. Kearney/FOREIGN POLICY Magazine Globalization Index 2006
Singapore: Most Cost-Competitive Place for Business
Source: IMD World Competitiveness Yearbook 2008
Singapore: Most Attractive Investment Incentives In Asia
Source: Japan Center of Economic Research, 2007
Singapore: 2nd in the world for Investment Potential, 1st in Asia
Source: IMD World Competitiveness Yearbook 2006
Price for any product is mostly determined by fundamental economics; demand and supply. When Singapore’s luxury property market has the same kind of demand from the High Net Worth Individuals from around the world as that for London, Tokyo, Hong Kong, New York, etc., I dare say that we can eventually see prices coming very close if not matching the prices of high end properties in these cities. Look out for my next post, in which I will discuss the instances of this already happening and the possibilities of it accelerating.
Contributed by Colin Tan of ColinTan Training and Consultancy for SingaporePropertyConsultants.com
