PROPERTY investors hoping for a lift in the ailing real estate market were likely to have been disappointed since MND’s statement last week .
The Ministry of National Development (MND) said last Monday it was not time to wind back the property cooling measures as private home prices have remained largely unchanged despite falling for two consecutive quarters.
Lifting the curbs prematurely could cause a sharp increase in demand and housing prices, MND said.
The moves that reined in property prices included extra stamp duties to curb speculative buying and the total debt servicing ratio (TDSR) framework, which was introduced on June 29 last year.
City Developments chief Kwek Leng Beng had said it seemed timely to “take another look” at the measures as foreigners were diverting their investments from Singapore to countries like Australia, Britain and the United States – a move that could undermine Singapore’s reputation as a global city.
Though these are opposing views, both camps have a point.
Fresh estimates from the Urban Redevelopment Authority (URA) last Tuesday showed that prices of non-landed units sank 1.1 per cent in the second quarter, which meant that the residential price index had eased by just 3.3 per cent over the past three quarters. This hardly seemed significant compared with the 60 per cent spike since the recent market upswing in 2009.
Analysts reckoned it would take a fall of 10 per cent or more before the MND would start to roll back some of the measures.
On the other hand, Mr Kwek is not wrong as the URA index may not reflect the severity of the downturn in certain segments of the market.
The recent launch of Wing Tai’s The Crest in Prince Charles Crescent illustrates this point: Only 30 units were reportedly sold at $1,750 per sq ft (psf) to $1,800 psf two weeks ago, even after Wing Tai offered reimbursements of up to 7 per cent for the additional buyer’s stamp duty (ABSD).
A closer look at the URA’s regional sub-index also showed that prices have performed unevenly in the three residential segments.
Prices of homes in the city centre have taken a beating over the past year. They dipped 1.5 per cent in the second quarter to levels recorded in the same period three years ago, when the sub-index stood at 207.9.
In fact, prices of city centre homes have almost fallen to levels recorded in the previous peak during the second quarter of 2008 – when the sub-index was at 198.3 – right before the global financial crisis caused prices to plummet over the next year.
City fringe units also fell in price by a gentler 0.6 per cent in the second quarter to reach close to 186.6 in the same period three years ago.
These regions, which have been the playground of foreign investors, have underperformed because of the ABSD, which imposes a 15 per cent levy, said Mr Mohamed Ismail, chief executive of property agency PropNex.
It is telling from the sub-indexes that home prices in the city centre and city fringe are now close to prices transacted before 2011, said Mr Ismail.
“If policies are not tweaked, it may cause further asset depreciation in those regions to levels back in 2008 and 2010”.
The cooling measures, however, have had less success reining in suburban home prices.
Since 2011, growth in prices of mass-market homes have been outpacing units in the other regions, noted Mr Ong Teck Hui, national director of research and consultancy at Jones Lang LaSalle.
Knight Frank data showed that suburban home prices have risen by 15.1 per cent since the second quarter of 2011. In contrast, city centre prices slipped 2.5 per cent, while city fringe condo units fell 1.2 per cent in the same period.
The suburbs, unlike the other regions, are affected by cooling measures to a smaller extent as they have been propped up by demand from owner-occupiers, not foreign investors, said Mr Ong.
Intensified competition for land also drove bid prices up in the past three years, especially after foreign players joined the development scene here, noted Ms Alice Tan, research head at Knight Frank. This propelled prices of mass-market homes on the back of the low interest rates that came in in 2008.
Mr Ismail added: “If the core objective of the Government is sustainable capital appreciation and affordability for Singaporeans, then it makes sense that policies should be calibrated for the fall in prices to be in the suburbs.”
Simply put, the mid-tier and luxury segments have had to suffer for the sins of the mass market and will continue to do so.
There is little doubt that the Government still wants Singapore to remain an attractive cosmopolitan city. But its larger priority is to ensure mass-market homes are affordable to Singaporeans.
Developers of luxury projects with many unsold units weighing on their balance sheet have little choice but to wait it out until mass-market prices correct more significantly so a roll-back of cooling measures can be initiated.