In Q3 flash estimates released by HDB, resale prices fell 0.3 per cent to 134.6 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. We continue to expect resale prices to fall for the next quarter of the year, but prices may have reached a bottoming-out level as this is the lowest decline in more than 2 years.”
Source: HDB, PropNex research
Diluted demand due to measures and increased supply
The sustained fall in resale prices is due to the 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. And in 2015, HDB will launch about 20,000 new flats for sale – such huge supply would have further taken away demand from the resale market, thereby stabilizing prices. In addition, 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 about 3 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 1.3 per cent in Q3 — the eighth consecutive quarterly decline since Q4 2013; as cooling measures continue to curb demand. With the private property market continuing to operate in a tight financing and regulatory environment, Singapore’s property market remains firmly in the down-cycle.
Mr Ismail Gafoor commented, “the scenario is that the relationship between homebuyers, sellers, developers and authorities is a bit of a catch-22. Homebuyers are highly discerning with some holding back their purchases in anticipation of prospective price declines and/or launches in good locations or attractive prices. Developers are selective on when to launch their new projects to avoid ‘bunching’ their products with other competitors which will further dilute demand, with an eye on government stepping in to adjust some of the cooling measures.”
Primary market performance will largely depend on developers finding the right pricing strategy which accurately portrays current sentiments. Buyers will still remain very price sensitive and quantum sensitive and would only go in if they perceive the property to be a good value proposition.
This may put a fair bit of pressure on sellers in the resale market, who may have to lower prices in order to make a sale.
Broad based decline all sub-segments
The price correction in Q3 was broad-based with mass market homes in the OCR sustaining the biggest drop of 1.6 per cent vs 1.1 per cent in Q2. 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 a second or third home given the lending curbs.
Mid-tier non-landed homes in the RCR fell 1.5 per cent following a 0.6 per cent in Q2.
ABSD will continue to be a stumbling block and keeping affluent home buyers at bay in the CCR. As a result, CCR prices extended its price decline with a 1.3 per cent decline vs. 0.6 per cent 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. 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 about 5 per cent in 2015.
The TDSR and other cooling measures will continue to sap demand and this will prevent any market pick up from being sustained. Mr Ismail also noted that home seekers will remain selective for 2015, with a project’s location and price points as the main drivers of demand.
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