Lower property price may draw buyers back in the market

After a year-long pull-back in buying activity that caused private home sales volume to plunge and prices to dip, property analysts told TODAY buyers are set to return to the market in greater numbers next year.

Private home prices, which have dipped 3 per cent this year as of the end of the third quarter, are expected to fall by another 5 to 10 per cent next year because of a projected rise in supply and the continued impact of property curbs. But with more choices for buyers, sales volume may bottom out from the lows this year that have mirrored levels during the global financial crisis.

“Developer sales volume for new launches will rise from this year. Developers will have to clear inventory to avoid paying Additional Buyer’s Stamp Duty (ABSD) or extension premiums for Qualifying Certificates under the Residential Property Act. Prices may fall up to 5 to 10 per cent,” said HSR International Realtors CEO Anne Tong.

Annual sales of new private homes could increase to at least 12,500 units next year from this year’s projected 7,500 to 7,800 units that is about half that of last year, she added.

Mr Alan Cheong, senior director of Savills Research, also expects a rise in sales volume, saying more buyers may return to the market after building up wealth from waiting on the sidelines for the past two years or so.

“Assuming property curbs did not induce a change in market behaviour towards residential homes, what these did was merely raising the barriers for liquidity to flow into the market … From the implementation of the Total Debt Servicing Ratio (TDSR) in June 2013, the workforce would have enjoyed two pay rises by the first half of next year — one for 2014 and the other for 2015. In addition, two bonuses would have been paid out,” he said.

“The store of wealth is increasing. Meanwhile, measures have been static. Barring a deflation of sentiment due to a cataclysmic event, fundamentals should prevail. In 2015, there may be defining projects that will bring about a pivotal reversal of sales volume.”

Impending interest rate rise heightens concerns

However, some analysts said the cooling measures and TDSR would continue to keep sentiment subdued. In addition, concern over the normalisation of interest rates in the United States, widely expected to begin around the second quarter of next year, will also weigh on the housing market here as an increase in borrowing costs in Singapore will follow suit, affecting affordability and curtailing demand.

This, coming against the backdrop of rising non-performing housing loans and a softening rental market, may lead to home owners selling their investment properties when mortgage commitments grow heavier.

“The rise in rates would be negative for the market … With rents looking to continue falling and interest rates expected to rise in 2015, many who bought units for investment purposes may decide to offload their investments as their rentals would not be able to cover their monthly mortgage interest,” said Mr Wong Xian Yang, research and consultancy manager at property agency OrangeTee.

Such a situation will add to the supply of units for sale, putting more pressure on the resale segment that will have to compete with the more than 20,000 new units that are expected to be completed next year.

But the Government’s move to scale back land supply for residential property development under the Government Land Sales (GLS) programme may help prevent the market from tipping over, following a rise in interest rates, said Colliers International’s director of research and advisory Chia Siew Chuin.

Sites under the Confirmed List of GLS for the first half of next year can yield about 3,020 private homes — almost 23 per cent lower than the 3,900 units on the Confirmed List in the second half of this year and the fewest since the first half of 2010. “This may provide some support for the private residential property market,” said Ms Chia.

Cooling measures likely to stay

Despite the consensus that prices will continue to fall, those hoping for cooling measures to be tweaked or lifted may be disappointed, with the Monetary Authority of Singapore saying last month that private residential property prices are still high, analysts said.

The moderation in prices and drastic fall in transactions this year are better aligned with Singapore’s slower rate of economic growth, which is expected to be about 3 per cent this year, down from 3.9 per cent last year. This is in line with the Government’s plan to steer the housing market towards a more sustainable path.

Mr Wong said: “The housing market is on course for a soft landing, which is what the Government wants. Assuming prices continue on this course, the Government is likely to adopt a sit-and-wait approach. However, should prices spiral downwards because of unforeseen shocks in the economy, I believe the Government would intervene like it has done in previous crises.”


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