The last two rounds of the government’s property cooling measures may have driven more home buyers to opt for smaller and cheaper homes, according to new research.
Property analysts attributed the trend to the tighter loan-to-value (LTV) ratio for home buyers with existing mortgages. The LTV ratio has been cut twice since last year, from 80 percent to 70 percent in August 2010, then to 60 percent in January this year.
Based on the analysis of around 14,000 caveats lodged for private homes sold between January 2010 and February 2011, more home buyers have been choosing smaller units (with an average size of below 861 sq ft) after each of the last two rounds of cooling measures implemented by the government.
According to analysis by property firm International Property Advisor (IPA), more home owners also opted for cheaper units, costing below S$800,000.
Between 1 January and 30 August 2010, nearly 30 percent of home buyers opted for smaller units. This rose to 42 percent after the cooling measures implemented in August and jumped further to 46 percent after the measures imposed in January.
Similarly, the percentage of home buyers purchasing units costing below S$800,000 surged from 22 to 28 to 30 percent, over the three time periods tracked.
Ku Swee Yong, Chief Executive of IPA, said that each wave of cooling measures has driven more buyers to purchase smaller and cheaper units.
“Today, investors are forced to think smaller due to the higher cash down payment required and the lower 60 percent LTV ratio for mortgages,” said Mr. Ku. “The impact of the upfront cash requirement and the reduced borrowing limit has herded more investors towards smaller units and towards projects in the outskirts of Singapore.”
According to data released by CB Richard Ellis (CBRE), the average price of smaller units measuring 861 sq ft each stood at S$1,420 psf from 20 February to 30 August 2010, in between the implementation of two sets of cooling measures.
This climbed to S$1,441 psf between 31 August 2010 and 13 January 2011 and rose further to S$1,559 between 14 January and 28 February 2011.
A market veteran said that small units are “the ones that are setting the record high psf prices”.
Source : PropertyGuru – 24 Mar 2011