The Total Debt Servicing Ratio was introduced in late Jun 2013, but it was in the fourth quarter of the year that private home prices registered the first drop in almost two years.
Since then, it has been on a downward trend and property watchers expect prices to continue falling in 2015 amid weakening demand and a large oncoming supply.
Including executive condominiums, official estimates put the number of completed units in 2014 at 20,852 units. The figure is expected to go up to 23,769 units in 2015 and 29,165 in 2016. In comparison, only 14,403 units were completed in 2013.
Observers say rent will also be weighed down by the looming supply, but add that buyers will still enter the market.
Said Director for Research and Advisory at Colliers International Chia Siew Chuin: “As long as we continue to see moderate but steady economic growth, I think home buyers will still look out for opportunistic buys where the property attributes and location attributes are attractive.”
WILL GOVERNMENT RELAX COOLING MEASURES?
“If you look at any form of a barometer to measure, from the mind of the authorities, they are saying that yes, we understand volume has dropped 30, 40, 50 per cent on different segments but prices have not dipped even close to 10 per cent,” said CEO of PropNex Realty Mohamed Ismail.
“The private residential market for the first nine months (in 2014) – prices have only gone down by 3 per cent. And for last year, it’s about 1.1 per cent. In the whole of two years, private property prices have not dipped even 5 per cent. So that’s why the resistance from authorities is this – ‘it is not time yet’.
“But we may wait another six months and we may still be at the same rate of 5 to 6 per cent. Why? Because generally, existing owners are not prepared to lower prices and are holding on to their properties, for a valid reason because interest rates are low. So there is a ground that people are holding, and as long as people are holding, prices are not going to drop.”
Others say it is more than just price movements the authorities are watching. Factors such as steady economic growth and high employment rate support home sales and are still prevailing today. Low interest rates may also encourage potential home buyers to seal that purchase.
“With all these factors still prevailing, it would then mean that if the government were to remove the measures at this point in time, it would be too premature,” said Ms Chia. “Whatever efforts that have been put in place earlier to contain or to curb buyers from over-extending themselves, that would have been in vain.”
US TO RAISE INTEREST RATES IN 2015: ANALYSTS
Some analysts expect the US to raise interest rates in the third quarter of 2015 and that Singapore will follow with an increase in rates as well.
“I think we only see a 100 basis point hike per year, which is much lower than the 200 basis point hike per year 10 years ago when the US last hiked their interest rates,” said an economist at Standard Chartered Bank Jeff Ng. “In terms of the translation to Singapore, it does mean that the interest rates increase in Singapore will be of a very modest and gradual pace.”
Also coming on stream in 2015: The first batch of executive condominiums (ECs) that will be affected by the resale levy. Second-time applicants who buy these EC units directly from developers will be required to pay a resale levy of up to S$50,000, which is similar to second-time applicants who buy Build-to-Order flats.
Property watchers say this may affect sales, as second-timers typically comprise of 60 per cent of the demand pool for ECs.
“Not forgetting the fact that in the last couple of quarters, HDB prices have also been dipping, so if HDB prices have dipped about 10 per cent, you forgo about S$40,000 cash, plus the levy of S$40,000 – you then have about S$80,000 lesser than before. So that would impact the aspirations of some to upgrade,” said Mr Ismail.
Developers may work around that by targeting more first-time buyers, although observers say this can result in smaller EC units, as developers strive to keep quantum affordable for them.
Source : Channel NewsAsia – 15 Dec 2014