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IMPACT OF LATEST JANUARY 2013 COOLING MEASURES
Singapore Property Market News and Analysis


Latest Property Real Estate News - Published on 14/01/2013

 HDB RESALE MARKET

Chief Executive Officer of PropNex Realty, Mr Mohamed Ismail, commented “It is evident that the latest cooling measures is to moderate the housing prices and instill greater prudence in financing HDB flat. The revised Additional Buyer’s Stamp Duty (ABSD) implemented will impact the Permanent residents (PR) segment most. PRs will now have to raise an additional 5% cash outlay to pay for the ABSD in their purchase of the first resale flat. As PRs constitute about 20% of the HDB resale market, it is predicted that demand for HDB resale flats are likely to be eased in coming months.

Additionally, PRs who could only borrow from financial institutions for the purchase of Resale HDB Flats are now going to be restricted by the Mortgage Servicing Ratios (MSRs) for Loans. This is going to be greatly reducing the quantum that they can borrow as the ratio is now being reduced to 30% of the borrower’s gross monthly income (originally 40% of the borrower’s gross monthly income).

PRs will now be disallowed from subletting and must sell within 6 months of purchase a private residential property. This measure will see some impact as PRs own 49,190 HDB flats out of the 1 million HDB flats and the 2,142 PR rented flats form about 5% of the all approved flats for sublet.

“Overall the new cooling measures will result in lowering the COVs as buyers will have to contend with lower MSR for all Singapore citizens and Singapore PRs and the new 7% ABSD for PRs. The COVs for bigger flats (ie 5-room and Executive flat category) will witness a sharper drop by 30% immediately. The current median COV for 5-room and Executive flats have been around $40,000 to $50,000. This lower COV may encourage some first-timers to enter the resale market. Overall, median resale prices of HDB this year will substantially slow down from the hay days of double digit growth in 2010 and 2011 and 6% growth in 2012. This year, we expect HDB prices to remain flat and at best attaining only a 1 to 2% price growth in keeping pace with the economic growth,” explained Mr Ismail.

PRIVATE RESIDENTIAL PROPERTY MARKET

“The hefty ABSD of 5% for PRs for the first property, 7% for Singaporeans’ second property purchase and 15% for foreigners will have a drastic impact on the sales volume of private properties in the coming months. Sales volume is expected to drop by more than 50% as buyers and investors choose to wait-out and see the effects of the dramatic cooling measures. It is predicted that the private property prices will head towards a slide of 5 to 7%. Developers had already paid high prices for the recent land bids and will not be able to sell much lower. Thus, developers are likely to be holding on to their project sales until the market recovers,” commented Mr Ismail.

He cautioned that danger lurks if there is a downward spiral effect on the prices. If the private property prices were to see a drop of more than 15%, this may result in Singaporeans, investors and even first-time private residential homeowners having a negative property asset portfolio, especially those who bought their private properties in recent time with only 5% to 10% cash down payment.

“HDB upgraders’ aspirations of owning a private property will face a bigger hurdle with the revised ABSD as one has to fork out additional 7% cash upfront in the purchase of the new launches, even though they could apply for a refund upon TOP. In addition, the 25% down payment will add on to the cash outlay required for the purchase. In order to avoid paying the 7% ABSD, the current owners had to contract to sell their existing apartment before they exercise the option to purchase. More people will end up being homeless during the transition of upgrading to private property. This may also result in most instances where the selling of homes being completed earlier than the buying one with little time left for renovation and shifting in,” remarked Mr Ismail.

END

For media enquiries, please contact:
Carolyn Goh
Corporate Communications and Marketing Manager
P & N Holdings Pte Ltd (holding company of PropNex Realty)
480 Lorong 6 Toa Payoh #10-01 HDB Hub East Wing Singapore 310480
DID : (65) 6829 6968 / 98287834 | Main : (65) 6820 8000 | Fax : (65) 6829 6600
www.PropNex.com



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