HDB resale prices fell again as tighter mortgage curbs continue to cool demand. According to flash estimates from HDB, resale prices fell 0.4 per cent to 135.0 points — the eighth consecutive quarter of decline. This continued decline comes after a 0.7 per cent and 6.2 per cent contraction in 2013 and 2014 respectively. The last time HDB resale prices fell for an extended period was way back in 2000 when prices fell for eight consecutive quarters from Q2 2000 to Q1 2002.
Mr Ismail Gafoor, PropNex Realty CEO said, “The potent combination of the measures has been effective at slowing down the price growth of HDB resale prices. It is also good to note that the 0.4 per cent fall in Q2 is the lowest in the last 8 quarters.”
Source: HDB, PropNex research
We continue to expect resale prices to fall for the next 2 quarters of the year, but prices may have reached a ‘bottoming-out’ level.
Diluted demand due to measures and increased supply
The falling resale prices are due to the potent combination of the government’s measures to stabilise 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.
Mr Ismail Gafoor also credits the falling prices to the increased BTO supply. Over 90,000 BTO flats were launched between 2011 and 2014, more than twice the number in the three years before. The Sale of Balance Flats programme has also offered a good number and variety of choices for first- and second-time buyers.
With a large influx of home completions starting from next year — along with the continued enforcement of government measures, Mr Ismail expects HDB resale prices to soften 4 to 5 per cent for full-year 2015, with volume hitting around 19,000 to 20,000 units due to the lower asking prices.
Private home prices continue to soften
Private residential prices fell 0.9 per cent in Q2 2015 — the seventh consecutive quarterly decline since Q4 2013; as the government’s five-year campaign to rein in property values continue to curb demand.
With the private property market continuing to operate in a tight financing and regulatory environment, Singapore’s property market remains in the down-cycle.
Mr Ismail Gafoor commented, “both primary and secondary volumes were softer due to lower launches and sellers holding back — given weak sentiments and soft demand, against the backdrop of macro uncertainties and concerns of an oversupply and an anticipation of future price declines”.
Broad based decline all sub-segments
The price correction in 2Q 2015 was broad-based with mass market homes in the OCR sustaining the biggest drop of 1.2 per cent vs 1.1 per cent in Q1. The sustained fall in OCR prices is the result of TDSR, which has a larger impact on the mass market segment where the capacity to take up loans is critical for middle income buyers. Mr Ismail believes that more potential buyers are finding great difficulty to purchase a home with a price quantum beyond $1.3 million given the lending curbs.
Mid-tier non-landed homes in the RCR fell 0.5 per cent following a 1.7 per cent in Q1.
ABSD has been keeping affluent home buyers at the sidelines in the CCR. As a result, CCR prices extended its price decline with a 0.5 per cent decline vs. 0.4 per cent in Q1.
Source: URA, PropNex research
Mounting uncertainties continue to temper demand and weigh down on prices
Tough ongoing property measures to cool HDB resale and a ramp-up in new supply of BTO flats will continue to keep some demand away from the private property sector. Due to a widening gap between HDB resale prices and the private residential prices, we believe that upgrading affordability will continue to be affected, especially in the OCR.
There is a mismatch of expectations with buyers anticipating further price reductions but developers/sellers holding on to prices. Sales may remain tepid until there is a lifting of the cooling measures, although we do not foresee the government relaxing the measures in the coming quarters as the degree of price correction in the housing market has yet to achieve a level of affordability that is in line with income.
In view of these downside pressures, prices of private residential properties are projected to remain on a moderation path as developers and sellers progressively adjust prices to move units. As such, we forecast prices to dip by between 4 – 5 per cent in 2015.
In terms of volume of transaction, we expect about 14,000 to 15,000 units to change hands as the price points now are more attractive to genuine buyers to enter the market compared to previous years.
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