Private home sales expected to rise, cooling measures unlikely

Sales of residential private housing in the first half this year are set to beat the second half of 2010.

But analysts said that will not prompt the government to introduce more property cooling measures in the short term.

However, they noted that the last round of cooling measures may have had an unintended effect on driving up public housing prices.

For the first five months, 6,810 private homes were sold.

With the June figures added in, this is set to surpass the second half last year, where 7,526 units were snapped up.

Despite the higher volume, market watchers believe there are unlikely to be more cooling measures in the near term.

Nicholas Mak, Executive Director of Research and Consultancy at SLP International said: “If the government rolls out cooling measures every few months, it does give the impression that all the previous cooling measures that they have implemented may be seen to be ineffective.

“The latest round of measures in January was one of the most severe ones in the history of the Singapore property market. It still needs time for it to work its way through the system. But certainly it has reduced the level of speculation, because the four year sellers’ stamp duty is rather punitive.

“And at the same time, the message has also been absorbed by many property investors that property speculations are not really paying off in this current regime.”

In January, the cooling measures that were rolled out included the lowering of the loan-to-value limit for buyers with more than one outstanding loan. This was adjusted from 70 per cent to 60 per cent of a property’s value.

Another change was the increase in the holding period for the imposition of Seller’s Stamp Duty from three years to four years.

The increased difficulty of getting a second home may have driven sellers away from the market.

As a result, there has been a reduction in the number of HDB flats being put for sale as potential sellers delay plans to upgrade into private units.

This appears to be reflected in the rising trend in Cash Over Valuation (COV) being paid for HDB flats.

COV is the premium that buyers pay over the valuation of the apartment. For the first quarter, the median COV was S$21,000.

According to some industry forecasts, the median COV is currently hovering around S$25,000 and is expected to hit S$30,000 by year-end.

“Today’s demand outstrips the supply, and some of the reasons here is due to (the fact that) some of the new measures have created a situation of less motivation for people to sell. That’s why some of these policies being tweaked to encourage people, … will help the supply side, and as such the COV may find moderation in terms of its price,” said Mohamed Ismail, CEO of PropNex.

Although the government has plans to ramp up the supply of public housing, this could take a while before they help relieve the pressure.

PropNex’s CEO said: “The government’s strategy of launching more Build-To-Order flats will have an effect on the resale price, but it is not going to take place in the next one or two months because it takes time for people to sign up for the BTO flats.

“In the HDB resale market last year, almost 50 per cent of buyers were first-timers. If all these people successfully bid for BTO, that will create less pressure in the resale market, and certainly prices will start to soften slightly. But we are probably going to see that in the tail end of the year and or the beginning of next year.”

In the mean time, observers said it may be necessary to tweak current policies to encourage sales in the resale market.

“Perhaps one possible solution is for the government to amend some of the measures on the private property market to allow some of the HDB owners to upgrade to private property, provided that perhaps when they take possession of their private property, they have to sell their flats within a short period of time and be given a more favourable loan-to-value ratio,” said Mak.

Source : Channel NewsAsia – 16 Jun 2011