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How Can the 5 Popular Macroeconomics Indicators Affect Your Property?


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Basic Economics of the Real Estate Industry


Introduction

The Singapore real estate market is closely linked to the other industries in Singapore and other parts of the world. Globalization and rapid technology advancements have made our world more connected. If you are only concerned on real estate news in Singapore when you are thinking of buying a property, then you are losing out!

In this article, we are going to touch on each of the macroeconomic indicators briefly and how it can impact the property market.


#1 Gross Domestic Product (GDP)

The GDP is the most commonly known indicator that measures economic growth. It is essentially the report book of the country. A positive increment in GDP between periods means that there is economic growth.

GDP is the monetary value of all finished goods and services produced within a geographical area over a specified period of time. Economic growth generally means a higher consumption and higher incomes because more finished goods and services are consumed and the money earned by business is used to pay the workers. Money is flowing in the economy and generally people have more money to spend. With more money to spend, the demand for property will rise. Assuming that the supply does not change, the price of property is expected to rise.


#2 Unemployment Rate

A higher unemployment rate means that more people in a country do not have enough income, and it will reduce the demand of properties. This will reduce the price of properties as the demand of properties fall. In our opinion, salaried workers usually look at HDB flats or entry level condominiums. When there is a high unemployment rate, prices of HDB flats and entry level condominium will be hit first.

However, a low spending in other markets may also lead to businesses having less income. Business owners may also suffer from a reduced income in a ripple effect. Luxury property prices may also be hit if it is serious enough and it happens after the price of HDB flats and entry level condominiums have been affected.


#3 Inflation Rate

The inflation rate is derived from the Consumer Price Index (CPI). The change in CPI over a period is the inflation rate. Inflation rate tells us the changes in cost of living as a whole. Rise in inflation rate is associated with higher prices and the eroding value of money. It is often caused by the economy growing too quickly and it reduces the purchasing power of consumers.

The lower purchasing power may affect the common people greatly. For properties, HDB flats and entry level condominium prices are the first to be hit as people will be more prudent with their spending.

To the ultra rich and people who invest, their money may be protected. Especially to the ultra rich, rises in prices of the property will not prevent them from buying because they are not as price sensitive. Luxury properties are less affected.


#4 Balance of Trade

The Balance of Trade, or Balance of Payment, is the net exports of the country and it is heavily dependent on foreign factors. It is also closely associated with the strength of the currency. A huge positive net exports means that the country has a lot of income from its exports. The income go to the businesses or government, and the money may be is also paid as salaries. Money circulates in the economy. It is like an injection of money into the economy. With more money flowing in the economy, a portion of it may be spent on properties. Demand of the properties will rise and the price will rise as well.


#5 Interest Rate

Loan is usually taken when purchasing a property. When the interest rates rise, it is more expensive to take a loan. People can decide not to buy now, or buy a cheaper home. It generally reduces the demand of properties, especially high end properties.


Others

Government polices like the Fiscal policies, monetary policies, exchange rate policies and any other related policies can leave a direct impact on the indicators. These types of policies are usually announced by the Monetary Authority of Singapore (MAS) or in Parliament.

Other events like en-bloc fever and cooling measures affect the property market more directly but its impact may hit other industries, which may cause a ripple effect and hit another segment of the property market.

Global events like war, famine, changes in US Federal rates can affect the Singapore economy easily because we are a very open market that depends heavily on trade. Any cut back in spending for another purpose by a foreign nation may cause our exports to fall, and it can affect one or more indicators. The situation worsens when the country is importing a lot from Singapore, or the events can lead to chained events, which many countries reduce their import from Singapore.


Conclusion

Whether you are going to purchase a property or not, it is important that the public is well equipped on this knowledge because it aids everyone in making better decisions in life.



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Common Basic Economics of the Real Estate Industry


Introduction

The Singapore real estate market is closely linked to the other industries in Singapore and other parts of the world. Globalization and rapid technology advancements have made our world more connected. If you are only concerned on real estate news in Singapore when you are thinking of buying a property, then you are losing out!

In this article, we are going to touch on each of the macroeconomic indicators briefly and how it can impact the property market. If you have acquired economics knowledge from high school or University, you'd probably find this too simple as you would have already known about this. We are also not going to insert any charts here to do the analysis because the aim is to educate the public on the macroeconomic indicators, not current affairs. If you are looking for current affairs with our opinions, please refer to the news section on our website.


Gross Domestic Product (GDP)

The GDP is the most commonly known indicator that measures economic growth. It is essentially the report book of the country. A positive increment in GDP between periods means that there is economic growth.

GDP is the monetary value of all finished goods and services produced within a geographical area over a specified period of time. Economic growth generally means a higher consumption and higher incomes because more finished goods and services are consumed and the money earned by business is used to pay the workers. Money is flowing in the economy and generally people have more money to spend. With more money to spend, the demand for property will rise. Assuming that the supply does not change, the price of property is expected to rise.


Unemployment Rate

A higher unemployment rate means that more people in a country do not have enough income, and it will reduce the demand of properties. This will reduce the price of properties as the demand of properties fall. In our opinion, salaried workers usually look at HDB flats or entry level condominiums. When there is a high unemployment rate, prices of HDB flats and entry level condominium will be hit first.

However, a low spending in other markets may also lead to businesses having less income. Business owners may also suffer from a reduced income in a ripple effect. Luxury property prices may also be hit if it is serious enough and it happens after the price of HDB flats and entry level condominiums have been affected.


Inflation Rate

The inflation rate is derived from the Consumer Price Index (CPI). The change in CPI over a period is the inflation rate. Inflation rate tells us the changes in cost of living as a whole. Rise in inflation rate is associated with higher prices and the eroding value of money. It is often caused by the economy growing too quickly and it reduces the purchasing power of consumers.

The lower purchasing power may affect the common people greatly. For properties, HDB flats and entry level condominium prices are the first to be hit as people will be more prudent with their spending.

To the ultra rich and people who invest, their money may be protected. Especially to the ultra rich, rises in prices of the property will not prevent them from buying because they are not as price sensitive. Luxury properties are less affected.


Balance of Trade

The Balance of Trade, or Balance of Payment, is the net exports of the country and it is heavily dependent on foreign factors. It is also closely associated with the strength of the currency. A huge positive net exports means that the country has a lot of income from its exports. The income go to the businesses or government, and the money may be is also paid as salaries. Money circulates in the economy. It is like an injection of money into the economy. With more money flowing in the economy, a portion of it may be spent on properties. Demand of the properties will rise and the price will rise as well.


Interest Rate

Loan is usually taken when purchasing a property. When the interest rates rise, it is more expensive to take a loan. People can decide not to buy now, or buy a cheaper home. It generally reduces the demand of properties, especially high end properties.


Others

Other than the macroeconomic indicators, we should also be aware of the government policies. Fiscal policies, monetary policies, exchange rate policies and any other related policies can leave a direct impact on the indicators. Just like monitoring the weather, anemometer, barometer and thermometer measures the wind direction and velocity, pressure and temperature respectively and gives us the numbers on what is happening. However, human activities like excessive carbon dioxide emission can change the numbers over the long term. These types of policies are usually announced by the Monetary Authority of Singapore (MAS) or in Parliament.

Other events like en-bloc fever and cooling measures affect the property market more directly but its impact may hit other industries, which may cause a ripple effect and hit another segment of the property market.

Global events like war, famine, changes in US Federal rates can affect the Singapore economy easily because we are a very open market that depends heavily on trade. Any cut back in spending for another purpose by a foreign nation may cause our exports to fall, and it can affect one or more indicators. The situation worsens when the country is importing a lot from Singapore, or the events can lead to chained events, which many countries reduce their import from Singapore.


Conclusion

Whether you are going to purchase a property or not, it is important that the public is well equipped on this knowledge because it aids everyone in making better decisions in life.



Date first posted on 7 January 2020; Last Edited on 7 January 2020

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