HDB resale prices fell again as tighter mortgage curbs continue to cool demand. According to data 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.
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. While activity was slow in Q1, transaction volume picked up in Q2 as lower prices may have enticed buyers back into the HDB resale market - more buyers may buy resale flats instead of BTOs due to the waiting time for completion.
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. 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 continue heading south with a 3 to 4 per cent drop for full-year 2015 - however, prices will not plunge as there is a large base of potential buyers.
Mr Ismail also predicts volume will hit around 19,000 to 20,000 units due to the lower asking prices ? compared to the 17,318 units transacted in 2014.
Private home prices continue to soften
Private residential prices fell marginally by 0.9 per cent quarter-on-quarter (QoQ) in Q2 2015, after a decline of 1.0 per cent in the preceding quarter ? this is the seventh consecutive quarter of decline. However, the decline has decelerated for the third straight quarter.
With the private property market continuing to operate in a tight financing and regulatory environment, Singapore?s property market remains in the down-cycle. However, the moderate price decline also reflects the resilience of market demand, which is underpinned by a stable economy and strong employment.
Mr Ismail Gafoor, CEO of PropNex Realty added that ?prices will still continue to fall, but not in a big way. It will be a protracted and slow price correction for the next few quarters.?
?We maintain our forecast that the 1.9 per cent decline (in the year so far) is a harbinger for a full year drop of possibly up to 4 per cent.?
Broad based decline all sub-segments
In both primary and resale markets, 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.
The price correction in 2Q 2015 was broad-based with mass market homes in the OCR sustaining the biggest drop of 1.1 per cent. 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 improved the most albeit falling 0.6 per cent. The relatively good performance for private homes in the RCR is largely expected due to its close proximity to the city with lower prices compared to CCR properties.
ABSD has been keeping affluent home buyers at the sidelines in the CCR. As a result, CCR prices extended its price decline with a 0.6 per cent decline in Q2.
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.
In light of recent sales performance, market conditions and continued enforcement of government measures, home prices in across all regions are expected to slide further.
Mr Ismail concludes: ?With TDSR being a long-term instrument ? and together with the ABSD, will continue dampen any speculative activity. Under such an environment, we expect price weakness to persist at least until the end of the year, unless the government tweaks some of its cooling measures.?
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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