Property cooling measures unlikely to be removed before 2017, say property analysts

By Michael Lim

/ Redas Seminar |

July 13, 2016 10:14 PM SGT

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Home buyers and investors who have been waiting on the side lines for the government to tweak the property cooling measures before committing to a purchase will have to wait a little longer.

“I think the earliest the property cooling measures could be tweaked will be in 2017 because we have not quite reached the double digit price correction that the government wants,” says OCBC head of treasury research and strategy Selena Ling. She was speaking at the Real Estate Developers’ Association of Singapore (REDAS) property market update seminar on July 12.

Market speculation was that the property cooling measures could be relaxed soon, especially for borrowing limits on the second or third and subsequent residential property purchases. Hopes were raised after the Monetary Authority of Singapore eased car loans in May, just three years after introducing restrictions in 2013. “However that does not seem to have happened,” said OCBC’s Ling.

She also sees developers facing greater pricing pressure due to the strong supply pipeline and slowing demand owing to the slower creation of new households, ageing population and tighter manpower policies.

Price cuts of 5% to 25% According to REDAS President Augustine Tan in his opening address, the pipeline of new supply stood at 57,597 for private residential units and 12,077 for executive condos (EC) as at end May. Meanwhile, unsold units total 15,000 units. In the meantime, developers’ annual new home sales totalled 7,316 and 7,440 units in 2014 and 2015 respectively. This reflects a 42% drop from the average sales volume of 17,683 units per year over the three-year period from 2011 to 2013, adds Tan.

REDAS estimates that some 1,100 to 1,200 unsold units across 17 developments will be hit by Qualifying Certificate (QC) extension charges by end of the year. The estimated charges are said to amount to close to $138 million. About 5,300 units remain unsold in 47 developments. This excludes ECs, where additional buyer’s stamp duty (ABSD) with interest will kick in from end 2016 to 2018. “In order to move sales, developers have cut prices ranging from 5% to 25% for some of their projects,” says Tan.

However, OCBC’s Ling feels that the downside risk in terms of prices is modest. “We have seen activity pick up in the first six months of the year, especially in the prime residential segment due to the ongoing creative promotions and payment schemes that some developers have rolled out.”

Soft landing? Ling sees the property market headed for a soft landing as interest rates are still relatively low, and are expected to stay low for some time. OCBC has adjusted its year-end forecast for the three-month Sibor (Singapore inter-bank offer rate) to 1.05% and the SOR (swap offer rate) to 0.9%. She sees the “lower-for-longer” trend continuing as global uncertainties persist.

According to Chua Yang Liang, JLL head of research for Southeast Asia, “there is a lot of hidden value in prime residences in Singapore.” JLL's basket of prime non-landed homes in prime Districts 9, 10 and 11 shows that prices have fallen by some 20% from 2Q2011. Prime residential prices in Singapore today are 165% lower than those in Hong Kong, and 92% lower than prices in London.

The URA 2Q2016 flash estimates show private residential prices having fallen by 9.4% since the peak in 3Q2013. However, the q-o-q price dip of 0.4% is the smallest decline registered over 11 straight quarters of decline. “We think the residential market is close to the trough,” says JLL’s Chua. “But we can expect minor adjustments in values over the next nine to 12 months with slight recovery by mid-2017 and a more pronounced recovery after that, depending on the economic conditions then.”

With residential prices in the Core Central Region and the city fringe (Rest of Central Region) stabilising, there’s less motivation for the government to make any policy changes, adds Chua.

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