The Total Debt Servicing Ratio (TDSR) framework, which took effect on Jun 29, 2013, has been blamed for the slowdown in the private housing market, and the steady drop in prices over the past six quarters. For the whole of 2014, developers sold around 7,316 private residential units, just under half the 14,948 in 2013.
The TSDR framework – which restricts monthly debt payments, including home and car loans, to 60 per cent of an individual’s income – was introduced to ensure financial prudence among borrowers.
The borrowing caps outlined in TDSR will likely become a permanent feature, and with the private property market showing greater signs of stabilising, some market watchers have suggested that the government ease up in other areas, such as the Additional Buyer’s Stamp Duty (ABSD), which discourages foreign buyers from coming into the property market and locals from buying a second home.
LARGE CASH OUTLAY, TIGHTER BUDGET DETERRING BUYERS
“Overall, the demand is there,” said Mr Ismail Gafoor, chief executive of PropNext Realty. “What’s holding people is this – these cooling measures – people are a bit reluctant. Today, when one wants to buy a second property, he is subjected to a loan-to-value of 60-40, and a third property is 40-60. That means you have to come up with a huge amount of cash outlay, so that deters people.”
With buyers on a tighter budget, developers have also been more cautious with their project launches. According to property consultancy Colliers International, prior to June 2013, developers were offering as many as 15 new projects for sale in a month. The number came down to seven in the past year, and about three this year. The firm said the slow housing market may also push weaker players to call it quits.
Said Colliers International’s Research & Advisory director, Ms Chia Siew-Chuin: “Most developers here in Singapore would have accumulated quite a bit of profits during the early years of the recent residential property boom and that has actually given them the capacity and holding power to ride out these subdued market conditions.
“However, those who enter the market at a later stage of the property cycle boom, and those who have a lower capacity to ride out these subdued conditions, would probably see themselves having to struggle. They may, at the end of the day, likely exit the market.”
BUYERS STARTING TO RETURN
But one analyst said it is not all doom and gloom, and buyers are starting to return to the market.
“For the second half of 2014, many people I spoke to believe that prices would fall by double-digits,” said Mr Alan Cheong, Savills Singapore’s Research & Consultancy senior director. “But starting this year, we began to sense that they went out to the market and found that prices are holding quite firm. So many of them are beginning to change their minds, they have the resources to buy last year or even in 2013 at the peak, but they didn’t buy thinking that prices are coming off. So sentiments are turning, they are beginning to come back to the market.”
North Park Residences, for instance, sold 486 units at a median price of S$1,374 per square foot in the first month it opened for sales. The project will sit atop the Yishun Integrated Transport Hub.
With a relaxation in cooling measures unlikely to be on the horizon, analysts have said that for now, good locations and pricing remain key consideration for potential home buyers.
Source : Channel NewsAsia – 26 Jun 2015