Singapore’s Budget Statement 2009 and Real Estate Value

Singapore’s Budget Statement for 2009 is eagerly anticipated. It is seen as pivotal to the outcome of both local and foreign businesses operating here in Singapore. As a matter of fact, it is so important that the Government has brought it forward to January 2009. The policies laid down in this Statement shall indicate the Government’s response in relation to the bleak world economic forecast for the year 2009.

Addressing a recent partisan assembly, Prime Minister Lee Hsien Loong announced that Singapore’s economy could possibly be negative next year. With the threat of slowing economic growth looming ominously on the horizon, PM Lee revealed the Government’s intention in expediently adjusting financial and economic policies to meet the global economic downturn by releasing the Budget Statement one month ahead of schedule.

Singapore pushes ahead with Infrastructural Developments

Expedient Response is Vital to Real Estate Value

Singapore’s ability to quickly respond to changing world economic conditions has done much to stabilize local real estate value. This was evident during the SARS epidemic and the Asian Financial Crisis. Back then, the Budget statement had also been adjusted to stimulate the economy and support jobs while strengthening the economy at the same time. As the Government was able to minimize businesses casualties, the demand for commercial properties dipped slightly.

Real estate stability here is an incidental result of the Government’s emphasis on helping companies cope with the challenges ahead. This not only safeguards jobs but in so doing, ensures that industrial, commercial, and residential occupancy rates remain at an optimum in relation to the economy.

As was previously projected, real estate value is not expected to see a dip beyond 10% in the coming year ahead. It is speculated that the Budget Report 2009 shall further consolidate this position in the face of weaker tourism and domestic exports.

Market Indicators

In its weakest showing since September of 2007, the Singapore dollar fell to a low of 1.5253 against the US greenback. As Singapore is heavily dependent on tourism and trade, a weaker Singapore dollar is seen as positive direction in securing competitiveness and maintaining economic stability. The MAS (Monetary Authority of Singapore), which plays a key role in regulating and adjusting its monetary policies is also expected to bring forward its policy review to further boost Singapore’s competitiveness as and when necessary.

In breaking news, Las Vegas Sands Corp is reported to have announced that it has raised enough funds to complete construction of the Marina Bay Sands. It says that it is halting its Macau and Las Vegas projects and therefore can proceed with Marina Bay Sands without assistance from the Singapore Government. The continuance of this development amid worldwide economic uncertainty highlights confidence in both local commerce and real estate value.

And in other local news, the government has announced that it will enhance schemes to help businesses here to secure loans from banks. Finance Minister Tharman Shanmugaratnam was cited as saying that the government will be announcing ‘enhancement of loan schemes that will involve risk sharing with the banks so that they maintain access to credit on the part of our companies’. As a point of note, the Government is more than able to do this as all the local banks in Singapore are semi-Government institutions.

Existing Policies in Place

Finance Minister Tharman Shanmugaraynam also addressed the issue of Singapore’s budget deficit for the year 2008. He was reported as saying that this deficit was expected to triple to over S$2.4 billion. Although this is much higher that what was initially expected by the Government, Tharman attributed this to ‘higher infrastructure costs, additional spending on procreation measures and lower revenues collected”.

Tharman reiterated the government’s stance on raising expenditures that will facilitate a more expansionary budget given the current economic slowdown. The funding for this deficit shall not come from trimming Government spending or raising revenues. He affirmed that the funding for this deficit shall come from last year’s S$6.4 billion Budget surplus. He maintained that ‘the larger deficit is an appropriate fiscal stance in the context of an economy that has entered a slowdown’.

History has shown that such Government policies have been very effective in countering economic slowdowns and buffering the impact of economic recessionary waves. Most countries in the region cut down on costs and brace themselves to face economic recessions, and then struggle to recover throughout the aftermath of such recessions. Singapore builds itself up during such periods in preparation of the conclusion of economic recessions.

Singapore’s proactive response by stimulating the economy and providing aid to businesses saves companies and jobs and in so doing, supports local the real estate sector. For when far less companies go under, occupancy rates remain high and, supply and demand for real estate remains stable.