Ravi Chandran
Residential property developers in Singapore believe that the condo prices here is set to fall, following the Government’s property cooling measures. The Business Times reporting on this said that the reversal of market sentiment among Singapore home builders was reflected in the Real Estate Sentiment Index (RESI) compiled by the National University of Singapore (NUS) and the Real Estate Developers’ Association of Singapore (REDAS).
The RESI plunged from 6.6 in Q2 2018 to 3.9 after the new property cooling measures were introduced, reflecting the negative sentiments of the residential property developers.
The RESI is reflective of the overall market sentiment, where a score above 5.0 signifies improving market conditions, while a number below that indicate worsening conditions. RESI is made up of the Current Sentiment Index and Future Sentiment Index, which respectively fell from 6.7 to 3.9 and 6.4 to 4.0. The Future Sentiment Index gauges the perception of residential property developers here, as well as the market conditions in the last six months, in assessing real estate outlook over the next six months.
Despite after the imposition of the new property curbs, 65 per cent of survey respondents still expect more new launches. This number though is down from 87.9 percent during the second quarter of this year.
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The majority of residential property developers now believe that prices of new private condos are unlikely to increase, with only 13.5 percent them expecting a hike in prices compared to 81.8 percent who held this sentiment in Q2 2018.
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The property sentiment especially looks bleak considering that just 3.0 per cent of survey respondents thought that prices of new private condos will fall in the second quarter, but 48.6 per cent now believe that price declines are inevitable after the new property curbs took effect.
Savills Singapore however expects home prices in Singapore to rise by 10 percent to 12 percent for the whole of 2018, and 5.0 percent to 10 percent next year. The prominent real estate services company said that despite the latest property curbs, the prospects for private residential prices remain bullish because of several factors.
Savills senior director Alan Cheong said: “There is still a great deal of pent-up household liquidity in the market. Housing prices remain affordable based on liquid assets/household. Property prices today have not outpaced the income growth since 2013.”
Speaking during a recent investor group luncheon hosted by RHBInvest, Cheong added: “Based on SavilIs’ observation, people in the 45-59 age bracket account for a significant portion of buying demand in show flats. In terms of absolute numbers, males in this bracket are likely to see a steady increase in population growth until 2021 – this should help buying demand.”
He noted that buyers’ interest in new private residential properties has been sustained even after the introduction of the new proeprty cooling measures. This was unlike 2013 when demand for private non-landed proeprties “collapsed” after the imposition of the Total Debt Servicing Ratio (TDSR).
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Cheong however believes that the government is unlikely to relax the cooling measures in the near term since only 6 out of the overall 26 interventions it made to rein in private property prices favoured the market. The en bloc sales market is especially expected to take a hit with the new property curbs. This in turn could lead to residential property developers offering higher prices for state land from 2H 2019 and onwards if the supply of such land released to the market remains low, he added.
There is a chance that the collective sales market will be dampened as developers become wary of end-demand and are hurt by the 5 per cent non-remittable ABSD on land purchase. This is expected to have an impact on their offer prices.
Paul Ho, chief mortgage consultant at the icompareloan.com, said that regardless of if residential property developers here drop their prices of not, some segments of people would still need to buy a property – especially those that have sold their apartments en bloc. It is unwise for these buyers to wait as it is still unclear if the prices will move up or down.
What is also the unpredictable is the nature of if a bank loan would be approved after the announcement of the new property cooling measures, said Mr Ho, adding that this is one major reason why buyers must use the services of mortgage consultants.
He said: “Mortgage consultants will be able to assess the buyers Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR) to gauge the buyers’ financial risk profile and advise on a suitable loan package. This will save them the hassle of running around, going to a bank that does not offer a loan for their housing type or ther personal profile, – not knowing what documents are needed, having to make 5-10 loan application and even the possibility of impacting the process of your home purchase.”
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