Cooling measures unlikely to ease without big price drop: Analysts

For those holding out for a rollback of property curbs after an election victory by the People’s Action Party (PAP), the wait may be longer than anticipated.

The pace of decline in home prices will need to double the 6.7 per cent drop from the peak two years ago before any of the restrictions are eased, said Chestertons Singapore and RHB Research Institute Singapore.

“The winning of a larger-than-expected margin will not be the main catalyst,” said Mr Donald Han, managing director at Chesterton Singapore. “When property prices drop by 15 per cent from the peak, that will probably instigate the Government to roll back certain measures, not a complete removal of any of them.”

The PAP extended its more than five decades of rule after gaining almost 10 percentage points from the 2011 polls with a 69.9 per cent victory margin, prompting earlier speculation that the Government may ease some of its curbs after being voted back to power. That view is now dissipating.

“Despite expectations building up for more pro-growth policies, we do not think any easing, particularly in property, will be done this year,” Mr Ong Kian Lin, a property analyst at RHB Investment Bank, said in a note to clients. “There may also be pushback from the populace if asset prices spike right after elections.”

Residential prices need to fall as much as 15 per cent before any measures are reversed, Mr Ong added. A data-dependent and gradual approach towards loosening the curbs would make more sense for the new Cabinet, the analyst said, starting with the additional stamp duties as prices fall.

For Mr Vishnu Varathan, a Singapore-based economist at Mizuho Bank, the slump in China’s stock market and prospects of higher interest rates may give the Government the impetus to tweak some property measures after the elections. The three-month Singapore interbank offered rate, which is used as a benchmark for mortgage rates, has more than doubled in a year to the highest since 2008.

Source : Today – 16 Sep 2015

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