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Thread: Weak property market to further drive down prices

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    Default Weak property market to further drive down prices

    http://m.todayonline.com/business/we...ve-down-prices

    SINGAPORE — After a tumultuous final quarter last year, Singapore’s housing market continued to weaken in the first three months this year as prices in both the private and public sectors fell and analysts warned that there will not be any reversal in fortunes as long as the Government’s cooling measures stayed in place.

    Private home prices slid 1.3 per cent in the January-to-March period from the previous three months, accelerating from the 0.9 per cent fall previously, the Urban Redevelopment Authority (URA) said in its preliminary first-quarter report yesterday.

    In the public segment, the Housing and Development Board (HDB) flash report showed the resale market extended its decline to a third consecutive quarter, with prices falling by 1.5 per cent in the last three months, matching the pace in the final quarter last year. This comes at a time when the demand for Build-to-Order (BTO) flats has weakened, with the overall application rate falling to 2.8 in the latest exercise, down from January’s rate of 4.1.

    Despite the declines, prices of both HDB and private homes are about 37 per cent higher than they were when the current round of cooling measures was first imposed in September 2009.

    Mr Ku Swee Yong, Chief Executive of real estate agency Century 21, said: “I don’t think we are at the bottom yet. There’s still room for falls because the property curbs have taken out a lot of demand since late 2009 when they started.”

    “Over the last four years, we have seen big and small changes to the policies, so I think we are probably seeing some fatigue in the market now,” he added.

    In the private housing market, condominium prices in the Core Central Region (CCR), or city centre, fell 1.3 per cent in the fourth straight quarter of decline. In the Rest of Central Region (RCR), or city fringes, prices declined 2.8 per cent, while those in the Outside Central Region (OCR), or suburban areas, dipped 0.3 per cent, the URA data showed.

    “The decline in private home prices for two successive quarters is in line with the slower transaction activities … and is an evident sign that the multiple dosages of the Government’s cooling measures and particularly the Total Debt Servicing Ratio (TDSR) have been effective in arresting price growth,” said Ms Chia Siew Chuin, Director of Research and Advisory at property firm Colliers International.

    She added that the TDSR framework introduced last June resulted in tighter financing rules, which restricted potential buyers’ budget and led to steeper price declines in the CCR and RCR.

    The framework requires lenders to ensure that the mortgage does not push a borrower’s total debt repayments above 60 per cent of his or her monthly income.

    Mr Mohamed Ismail, Chief Executive of PropNex Realty, said the weakening HDB resale market might also hurt demand for private housing.

    “The demand for private homes might also be affected by the drop in HDB resale prices. The smaller gain achieved from the sale of their HDB flat will limit their budget for their new private property and may cause some to put their plans on the back burner because the potential profit is insufficient to allow them to upgrade,” he said.

    And the HDB resale market will continue to come under pressure as buyers are constrained by the tightening of the Mortgage Servicing Ratio to 30 per cent last August and the reduction of the maximum term to 25 years for HDB loans and 30 years for bank loans. Rules requiring new permanent residents to wait three years before they can purchase public housing, introduced at the same time, are also expected to curb demand.

    The PropNex CEO expects HDB resale prices to fall by 6 to 8 per cent this year.

    The private residential market will likely see a smaller decline of not more than 5 per cent, said Ms Christine Li, Head of Research and Consultancy at property agency OrangeTee, as developers may not cut prices of new launches soon.

    “Prices of new launches will still hold because developers are not in a hurry to cut prices significantly — they still have time to market the projects. And they paid high land costs, there’s no reason for them to sell at a loss yet,” Ms Li said.

    “But overall, I think the market has just started tapering off. We feel that because the measures are not tweaked or removed, financing is still very much restricted, the pool of eligible buyers is shrinking so liquidity in the market is a problem. If the new rules are not relaxed, I think there’s further downside to the prices,” she added.

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