Home prices could drop by up to 15%: DBS chief

[reporter2]

http://www.straitstimes.com/archive/...chief-20140215

Home prices could drop by up to 15%: DBS chief

Published on Feb 15, 2014

By Mok Fei Fei


HOUSE prices could plunge by up to 15 per cent this year amid a softening property market, said DBS chief executive Piyush Gupta yesterday.

Mr Gupta also said that he expects property cooling measures to be wound back if prices start heading south.

His remarks, which came during a DBS results briefing, are a further sign that real estate could be in for a difficult year.

Mr Gupta told the briefing: "My own sense is that you're looking at a correction of more than 10 to 15 per cent. I think the correction might not be consistent."

He expects the luxury segment to take the biggest hit while mass market home prices may drop by about 10 per cent.

Mr Gupta also held out hope that cooling measures could be tweaked if values begin declining.

"If the market continues to stabilise and there's this beginning of a correction, I would expect the central bank and the Government to start taking off, removing some of the macroprudential measures they put in," he said. "And if they do, then that will create support to the extent of the drop-off in the housing market this year."

His comments came as property players, including City Developments executive chairman Kwek Leng Beng, called on the Government to consider relooking some of the market measures. Curbs on mortgage loans, particularly the total debt servicing ratio framework introduced last June, have curbed sales and slowed price growth. Private home sale prices slipped 0.9 per cent in the fourth quarter last year while HDB resale prices declined 1.5 per cent.

A decline in prices is not expected to have a material impact on DBS' earnings, noted Mr Gupta. The bank cleared a stress test that crunched its numbers through a scenario of a 30 per cent fall in home prices. Any potential threat to its housing portfolio would come from higher unemployment, since affordability of home purchases here depends on income levels, Mr Gupta said.

"In Singapore, it continues to be full employment, so we're not seeing any stress on that count."

[email protected]

[wt_know]

drop drop drop ... talk enough liao la ... not sian meh?

[reporter2]

http://www.businesstimes.com.sg/arch...-year-20140215

Published February 15, 2014

DBS sees home prices falling by 10-15% this year

But this decline will not make a material impact on the bank's portfolio: CEO

By Siow Li Sen [email protected]

Singapore

DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year - more than the 10 per cent forecast by property consultants - but says that this decline would not make a material impact on the bank's loan book. Speaking at DBS's Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.

As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. "The Singapore portfolio is really driven on income considerations . . . As I've said before, the pressure will likely start coming when unemployment rises - more than when property prices change." Singapore's unemployment rate is now at a low 1.8 per cent.

Mr Gupta said: "All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don't expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent."

He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.

Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.

Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS's $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.

OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: "That's expected, given all the cooling measures that have been imposed. We've built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we'll see a bit of tapering in that period."