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PropNex analysis on Q4 2015 HDB/URA data
Singapore Property Market News and Analysis

Latest Property Real Estate News - Published on 22/01/2016

HDB resale prices rose 0.1 per cent in Q4 2015 — the first quarterly increase in 10 quarters. This price reversal comes after a 0.7 per cent and 6.2 per cent contraction in 2013 and 2014 respectively. However, overall prices still fell 1.6 per cent in 2015.

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. Though we expect resale prices to be flat in 2016, it may have already reached a bottoming-out level in Q3 2015.”

Resale prices expected to be flat in 2016

In 2016, the government will maintain measures to stabilise the public housing market such as 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.

In addition, HDB will increase the BTO supply (HDB will launch 18,000 new BTO flats in 2016, more than the 15,000 which were launched last year) – which will sap demand from the resale market, thereby stabilizing prices.

“HDB prices are going through a period of consolidation with marginal price movements as compared to the previous two years. Mr Ismail predicts that 2016 may spring a surprise as the current price points will entice more buyers to enter the market as it is attractive enough for young couples and upgraders – which could also be partly attributed to the non-existence of COV across the board,” says Mr Ismail.

2016 will probably see a flat price movement of about -1 to +2 per cent, with volume exceeding 20,000 units due to the lower asking prices.

Lowest price fall for private home prices fall for more than 2 years

URA’s Q4 2015 data shows that prices of private homes in Singapore fell 0.5 per cent quarter-on-quarter (QoQ), with an overall 2015 price fall of 3.7 per cent, marginally lesser than the 4 per cent decline in 2014. The overall price decline in 2015 reflects the current languid market sentiment and the sustained impact of the cooling measures. However, this is the lowest fall in more than 2 years.

For 2015, luxury properties in the CCR fell the least as affluent home buyers have greater holding power are taking their time to identify their next investment property whilst also looking out for overseas properties. As a result, CCR properties recorded an overall drop of 2.5 per cent - not as significant as those in the RCR and OCR.

Though prices of homes in the OCR and RCR remained unchanged in Q4, the overall price fall in these regions for the year is the result of TDSR, which has an 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 greater difficulty to invest in a private home with a price quantum beyond $1.3 million given the lending curbs.

In addition, secondary market sellers also face stiff competition from developers who are continuing to launch projects at attractive prices and incentives. As such, buyers will have more options – they will only commit 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.

Outlook for 2016

While reasonably-priced homes with desirable product and location attributes will continue to find favour with homebuyers, the private residential market looks set to continue its price decline, with weak demand due to various factors — with the TDSR and ABSD working in tandem to rein in exuberant home buying. Buyers are now more discerning and are taking a longer time to decide on investing in private homes.

Additionally, HDB resale flat prices have further softened, thus reducing the motivation for HDB owners to upgrade to mass market private properties as their purchasing power have been affected– due to a mix of abundant incoming supply, continued enforcement of cooling measures and public housing regulations such as the tighter MSR on HDB loans.

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 into 2016, with possible negative growth of about 3 per cent. The government has stated that it is not time to unwind the existing cooling measures yet; however, with 9 consecutive quarters of price declines and lukewarm transaction volume, it is timely to look into tweaking some of the measures, namely the ABSD.”

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