Housing portal co-founder says there is room for further decline in prices, which have fallen only 2 to 3 per cent this year
With private home prices declining a mere 2 to 3 per cent in the first six months of this year, the Government has done the right thing to maintain the property curbs for now, said chief executive and co-founder of real estate portal PropertyGuru Steve Melhuish.
At the current rate of decline, it could be another 12 to 18 months of downtrend before the Government starts to consider reviewing some of the measures that have been introduced to take the heat out of the property market, he told TODAY.
“The decline has only been about 2.5 per cent in the past six months, (but) home prices in the private space increased about 70 to 80 per cent in the past few years, so this rate of decline is not catastrophic,” Mr Melhuish said. “With things staying status quo, we’ll continue to see this price decline take place in the next 12 to 18 months. It sounds like a long time, but if the market has been growing for five to six years, you can’t expect it to fall in one year and then bounce back.”
Private property prices grew 62 per cent between the second quarter of 2009 and the third quarter of last year before falling in the final three months last year, data from the Urban Redevelopment Authority showed. They dipped further by 1.3 and 1 per cent, respectively, in the first and second quarters of this year.
Transaction volume took a hit earlier, with sales of new launches plunging 73 per cent right after the Total Debt Servicing Ratio (TDSR) framework was introduced in June last year. They have not recovered to levels seen before the TDSR took effect.
With the slip in prices lagging behind the fall in sales volume, many market watchers have indicated that there is room for further decline in prices as the curbs continue. Mr Melhuish said prices could decrease at a quicker rate to register an 8 to 10 per cent fall by the end of this year.
“What’s happening now is population growth is not as high as it was, so you see less demand for housing. The cooling measures have also caused a reduction in demand. At the same time, there’s a big pipeline of new projects in 2014, 2015 and 2016, and the unsold properties from the reduction in demand now will add to that supply,” he said.
If the scenario that Mr Melhuish outlined plays out, there would probably be another 10 per cent or so fall in private home prices next year, which may lead the Government to review some measures.
“Once there’s a 15 to 20 per cent drop, it’s quite significant. My personal opinion is that that’s when the Government will turn things around,” he said.
Source : Today – 11 Aug 2014