FIRST
Property market under threat as market volatility rules
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f intense volatility continues to roil global markets, analysts fear that Singapore’s already-fragile property sector will suffer as an unintended victim. Analysts say that severe losses in the stock market could trigger property default sales and cause home prices to drop much more than expected, jeopardising the much-desired soft landing for the property market. “Sudden shocks in the equity markets tend to be a precursor of more auction listings, as owners need to adjust their financial position,” says Dr Lee Naijia, DTZ’s head of Southeast Asia research. As a result of increased volatility, Lee expects that there will be more choice homes in the market in 2016. A page from the past A report by JLL highlights that the stock market is often a leading indicator of real economic conditions, and that the recent sharp correction in the stock market signals a more severe slowdown in the Chinese economy than what was initially reported. This does not bode well for Singapore, considering the growing importance of the Chinese economy on the Singapore economy and the property market. The report says that if Chinese economic conditions deteriorates further and the stock
market haemorrhage continues, it may have a negative impact on the broader economy, resulting in lower employment levels, and leading to a more severe correction in the Singapore property market. “Looking back to the past, the residential market for example, corrected by 4% to 6% a quarter in some instances. Should the market lose footing, it is not impossible to expect a recessionary correction of this magnitude,” says Dr Chua Yang Liang, head of research, Southeast Asia at JLL. Historical data show that stock market crashes can have devastating effects on the domestic property market. During the Asian Financial Crisis of 1998, local property prices crashed by 35% to 44%, while the Straits Times Index (STI) tumbled 55% from its peak in the span of about two-and-a-half years. During the 2008 Global Financial Crisis, meanwhile, the stock market slumped 62% from its peak while property prices dropped by 11% to 25%. Volatility to rule JLL’s report warns that market volatility will be prevalent in 2016. And as current debt levels in several Asian countries are higher than they were before the AFC, these economies are more vulnerable to a global economic slowdown.
Is a hard landing imminent?
Stock market movements typically lead property market movements by one to two quarters, JLL adds. This means that sharp declines in the Singapore stock market could signal further property price corrections in the coming quarters of 2016. “If this scenario pans out and threatens the stability of the property market and wider economy, it may prompt the government to re-visit its property cooling measures and other macroeconomic policies including economic stimulus packages,” Chua says.
OFFICE WATCH
Bordier & Cie’s office kills the ‘closed door’ view While most people view private banking as “closed door” transactional relations, the essence of Bordier & Cie was established upon long-term relationship banking where transparency and trust are critical fundamentals. In Asia, managing partner Evrard Bordier has taken the family business into a new paradigm of open engagements. The transformation started with a reinvented global brand followed by a new private banking office in Singapore, at CapitaGreen, a Green Mark platinumcertified building. Spanning 12,300 sq ft, the new office is hyper- modern, with brazen, clear glass client meeting rooms in the front office; an exquisite juxtaposition of contemporary and Asian art pieces throughout; and a motion-sensor height and light adjustable table in Evrard’s room.
12 SINGAPORE BUSINESS REVIEW | MAY 2016
Legacy and modernity
CEO’s standing desk
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No closed doors