Resale market finally shakes off ABSD

Preliminary price indices for completed non-landed properties released last week suggest that the resale market for private apartments has finally shaken off the dampening effects of the additional buyer’s stamp duty (ABSD) imposed last December.

The National University of Singapore’s flash Singapore Residential Price Index for last month inched up 0.8 per cent, the second consecutive monthly rise following a more modest 0.4 per cent rise in March.

Unlike the market for new homes which not only rebounded fairly quickly but grew in strength, the resale market had tanked in February – a result of the shock therapy induced by the ABSD.

It was one of those rare months where all the sub indices moved in the same direction. The overall index was down 1.6 per cent.

For properties in the central region, the sub-index was down 2 per cent; for the non-central region, it was 1.2 per cent lower; and for small apartments, it decreased by 0.8 per cent.

For the following month of March, it was the reverse. All the indices were up but the improvements were modest compared to the declines in February and was led by the 2.7 per cent price jump for small apartments. Prices of properties in the central and non-central areas had risen by only 0.1 per cent and 0.7 per cent, respectively.

While there was consistency in the direction of the price movements, we were not sure if the improvements in the price indices for March were due to a real improvement in the market or simply a by-product of higher volatility inherent in monthly indices.

But now the estimates for last month show that the market’s improvement was real. The sub-index for the central region was up 1.6 per cent, while that for the non-central region was unchanged. The finalised numbers could be better.

While the sub-index for small units registered a slide of 1.2 per cent in April, this had come after the scintillating rise of 2.7 per cent in March.

I put this down to the higher volatility exhibited by this sub-index because of the smaller numbers of completed units in this category. In any case, the net price gain over the two months since February is still a significant 1.5 per cent.

With the resale market’s recovery, I would say both the market for new and resale homes have finally shaken off the effects of the ABSD – it took just a month for the new home market and three months for the resale market. There are already reports of more high-valued resale homes being transacted recently.

If the effects of the ABSD are now limited in determining future sales and price trends, what can we expect from policymakers now?

The market has been dominated by talk of more cooling measures, especially for shoebox properties.

I have no quarrel with the small size of such properties per se. They have their place in the market but it becomes a big problem when such small sizes become the norm. Today, about half of new units sold are of sizes below 800 sq ft.

There are huge unquantifiable social costs – on the family unit, population fertility rates and psychological stress, just to name a few.

Some may say it is not a problem if the bulk of such properties are sold in the heart of the city. But if all the developers are focused on building small apartments, who is building the family-sized homes?

A whole year of small apartment sales is alright, but not when this stretches to two or three years or even more.

When developers were focused on building and selling prime apartments for huge profits between 2006 and 2008, the supply of suburban homes dropped significantly. This led to a huge pent-up demand for suburban mass market properties.

And we witnessed first-hand – to our shock – how prices for these properties shot up in the second half of 2009. We must and should learn from this, if only to lessen price volatility, in particular the steep jump in prices.

Besides possible curbs on shoebox units, there is also market talk that the authorities may want to tame the significant uptick in new home sales.

Some analysts have pointed to the recent Hougang by-election result that they viewed as an affirmation by Singaporeans that there should be no let-up in cooling measures in the private housing market.

We shall see.

By Colin Tan – head of research and consultancy at Chesterton Suntec International.

Source : Today – 8 Jun 2012

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