Private home prices at a new equilibrium

Private property market prices in Singapore may be levelling off at a new support level after five years of cooling measures that have been very effective at stalling the market.

However, it appears the effectiveness of the measures has levelled off. Barring major catastrophes such as war, epidemics or financial crises, private property prices are expected to hold up, unless more resale supply is introduced or the Government removes the cooling measures.

According to SRX Property, the market transacted an estimated 468 units last month. This is down 77.2 per cent from the peak of 2,050 units sold in April 2010.

Prices, on the other hand, have dropped a mere 5.6 per cent since the market’s monthly peak in January 2014, based on the SRX Price Index.

There are three signs that it is going to be difficult for the cooling measures to pull prices down further.

The first half of this year was rough for the private resale market, with the SRX Price Index dropping rather dramatically from 178.8 in January to 170.2 in June.

However, since June, the index has found a plateau in the 168 to 170 range. This suggests the market has come to terms with the impact of the Total Debt Servicing Ratio (TDSR).

Until the TDSR, private resale prices would not come down. They finally capitulated at the beginning of the year. But now, it seems the market may have found a price equilibrium under the new TDSR regime.

Second, market sentiment, as measured by the median Transaction-Over-X Value (T-O-X) has improved in the past few months. T-O-X measures the actual transaction prices over the computer-generated X-Value of each unit in Singapore.

Last month, the national median T-O-X was negative S$2,000, which means the average buyer was paying only S$2,000 below the computer-generated X-Value. This is a big improvement over the negative S$20,000 in March and July.

In other words, fewer people are paying significantly below the computer-generated X-Value. This means less downward pressure on prices.

Third, volume is down significantly and has been consistently in the mid-400-unit range. There is not much more room for volume and, hence, prices to drop.

The cooling measures, in particular those impacting the TDSR, have been quite effective at discouraging people from putting homes on the market.

While bargain hunters and those unaffected by the cooling measures are delighted to buy today, sellers are not as inclined to sell. They have been sitting on the sidelines, waiting for prices to rebound before putting their properties on the market.

Unless a new round of resale supply comes onto the market or there is an external shock that causes a sell-off, it will be difficult for the market to drop much further, given the low stock of homes for sale each month.

By Sam Baker – co-founder of SRX, an information exchange formed by leading real estate agencies in Singapore to disseminate market pricing information and facilitate property listings and transactions. For more details on the data used in this article, visit

Source : Today – 24 Oct 2014

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