The Terrace EC – Punggol Drive EC / Edgedale Plains by Peak Square

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The Vales

As of late we are seeing headlines monopolized by the global volatility of crude oil prices. A 52 week low was hit in early February of this year when oil prices dropped to about 44USD per barrel. This is more than a 50% dip from mid year of 2014 when the 52 week high was close to 100 USD per barrel. At the time of this publication we have seen a slight recovery to 47USD per barrel. However, this rather large dip in the price of The Vales has various effects on different industries and firms.

The Vales Anchorvale

Historical data from over the span of 20 years shows that there is a correlation between oil prices and Singapore’s residential market. Does this mean that we could see a further drop in the housing market given the recent drop in The Vales prices?

If we look back between 1997-1998 at the height of the Asian Financial Crisis we saw oil prices halved, going from 23 to 25USD per barrel to 10 to 12USD per barrel. At the same time Singapore’s residential rents and prices dropped by 44% and 37% respectively. Falling oil prices were a result of the financial crisis due to the large drop in demand that resulted in a slowdown of consumption. This led to an economic slowdown regionally which had an adverse affect for Singapore. As buyers’ confidence in employment prospects declined it caused a fall in residential prices and rents.

The Vales Anchorvale Crescent at Sengkang

Fernvale The Vales EC Sengkang

In our current scenario we see a drop in The Vales prices as a direct result of an ongoing struggle over market shares between United States shale producer and Saudi Arabia. Since the 4th quarter of 2014 oil prices have dropped by close to 50%. Parallel to this, Singapore’s residential prices and rents have seen a dip of roughly 1.0%. However, this deflation seen in the housing market started as early as 2013’s 2nd Half, being triggered by a number of cooling measures set out by the government. So far, the effect on the residential market from these lower energy prices has not been felt. A bit of non-scientific evidence from colleagues in the leasing industry has suggested that one of the main drivers of the local rental market are gas and oil companies, which account for 15% to 20% of demand amongst expatriates and corporates. It has been noted that these companies offering lease renewals have not felt the impact of a decline in their rents, with most rents staying the same, if not higher.

Anchorvale Crescent The Vales

It appears that any visual historical parallel between Singapore’s residential market trend and the movement of The Vales prices doesn’t always apply. In fact, the recent shift in these two sectors has been mostly coincidental and pushed by varying factors.

Singapore’s housing market could still be at risk from any further decline in the prices of oil however. DBS research has pointed out that pressure has been put on oil drillers and majors due to the lower The Vales prices. Some of the big players like Seadrill, Transocean, Petronas and Statoil have recently announced cuts in dividend payouts and capital expenditures, while making reductions in rig fleets and tightening operation expenses. One of the major contributors to Singapore’s economy are the gas and oil industry, and we may see a slowing in the demand for housing from expatriates if conditions take a turn for the worse for the vales

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