HDB resale prices cools further
The HDB resale market continued to cool in 2Q 2014, this is also the fourth consecutive quarter of price drop, according to flash figures released by HDB today. The various measures, including loan curbs and the strong supply of new flats, continue to weigh down on demand, which brought about the sustained price decline.
MSR main reason for the sustained decline
The falling resale prices can be due to various government’s measures to cool the public housing market such as, reducing the Mortgage Servicing Ratio (MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans, three-year wait for new PRs before they can buy resale HDB flats, and allowing singles to buy two-room BTO flats in non-mature estates. Thus, these measures work in tandem to reduce the resale demand.
But primarily, the main reason behind the slowdown in market activity is attributed to the income cap on how much buyers can borrow to pay off their mortgage.
With smaller loans, some buyers can no longer afford to upgrade to larger flats.
Increased supply and reduced demand to continue exerting downward pressure on resale prices
Over the next three years, 80,000 new BTO flats will be completed and keys handed over to buyers. HDB will also launch a total of 24,300 BTO flats in 2014 – this is just slightly lower than last year's supply of 25,100 units. And according to Minister Khaw, 18,000 households in the next 3 years will be moving to a BTO flat, thus they are required to sell off their existing flat within the 6 months. With the forthcoming supply of HDB resale units in the market, it is expected to further create a downward pressure for HDB resale prices.
“I foresee this to be a quiet year for the HDB resale market – similar to 2013 which had seen the fewest deals in years. However, I expect the market to pick up in the second half as lower prices may entice buyers back into the HDB resale market to possibly upgrade to a larger flat,” commented Mr Ismail.
Mr Ismail expects HDB resale prices to soften 6 to 7 per cent for full-year 2014. Volumes should stay flat or improve slightly in 2014 due to increased supply as there are more sellers in the market due to owners taking possession of keys in BTO flats and private properties.
Third consecutive quarter of decline for Singapore’s private home prices
According to the flash estimates released by URA today, private home prices in Singapore continued to fall in 2Q 2014 as government interventions crimped real-estate investment. URA’s benchmark private home price index flash estimates dipped 1.1 per cent q-o-q in 2Q, its third consecutive quarter of moderation.
For the 2 quarters, the index’s 2.4 per cent decline sets the stage for a full year drop of possibly up to 5 to 6 per cent, with luxury/prime properties taking the bigger hit and mass-market homes being the least affected.
Affordability key to all groups of buyers
In the resale market, homebuyers’ remained averse to properties with a large quantum. With their persistent price sensitivity and the reduction in their purchase budget under the strict TDSR framework, prices of homes in all regions registered decreases.
In the primary market, the concern of affordability remained crucial to homebuyers. As such, developers dangled various sweeteners to attract buyers such as early-bird discounts, price adjustments and/or direct star buy opportunities. With developers pricing their new projects sensitively, price declines were registered.
As a result, mass-market home prices in the OCR declined for the third straight quarter by dipping 1.1 per cent; RCR prices fell 0.6 per cent—less than the 3.3 per cent drop registered in 1Q 2014. Finally, high-end properties in the CCR fell for the fifth consecutive quarter as it dropped 1.5 per cent.
Buyer’s market in 2014
While reasonably-priced homes with desirable product and location attributes will continue to find favour with homebuyers, the private residential market looks to be heading towards a more muted growth trajectory, with weak demand due to various factors.
For one, although liquidity remains flushed in the market, the multiple rounds of government measures culminating in the implementation of the latest TDSR framework have effectively tightened credit and this should continue to rein in exuberant home buying.
Additionally, the potential homebuyer base is expected to shrink further with curtailed demand from upgraders from the HDB market. The purchasing power of these upgraders will be affected by the softening resale prices of HDB resale flats – due to a mix of abundant incoming supply, cooling measures and new public housing regulations which include a tighter Mortgage Servicing Ratio (MSR) on HDB housing loans.
On the supply front, the plethora of choices available - from the record launch of new homes in the past two years to the sizeable residential supply that is expected to materialise in the next few years up to 2016 – will see homebuyers adopting a deliberate and selective approach towards home buying. Buyers’ fatigue to escalating prices has also set in and some developers may adopt a softer stance when pricing toentice homebuyers to commit.
Mr Ismail says: “It’s difficult for prices to regain momentum due to the continued enforcement of both the ABSD and TDSR, which will continue to work in tandem to ease demand. In addition, the sustained supply and intensified competition among developers will also keep a lid on excessive price growth. This is an opportune time for those considering upgrading.”
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