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Thread: 'Good' if resale price slide continues

  1. #1
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    Default 'Good' if resale price slide continues

    http://www.straitstimes.com/archive/...inues-20141230

    'Good' if resale price slide continues

    Published on Dec 30, 2014 1:02 AM


    THIS year's slow slide in public resale flat prices is what National Development Minister Khaw Boon Wan hopes to see in 2015 too.

    "If what we observe this year continues into next year, I would consider that a very good development," he told reporters yesterday morning.

    Asked if a double-digit fall in Housing Board resale prices is expected, he replied: "I hope not."

    Drastic price falls are "seldom good" and usually due to external events such as financial crises, he said. Single-digit changes are easier for people to accept.

    Experts expect HDB resale prices to have fallen by under 8 per cent for the whole of this year.

    Their predictions for 2015 range from stagnation to a further drop of 5 per cent to 8 per cent for the full year.

    The subdued resale market is the result of a ramped-up supply of new flats from 2011 to 2013, as well as cooling measures such as loan curbs and stamp duties.

    Asked if cooling measures will be relaxed, as developers have called for, Mr Khaw replied that some of the measures are temporary and will be adjusted when the market is cool enough.

    "The question is, when do you do that and how do you do that. So those are obvious issues of consideration next year."

    But measures related to financial prudence are permanent and should be preserved, he added.

    These include the Total Debt Servicing Ratio (TDSR) framework, which puts a 60 per cent cap on the proportion of salary that goes towards servicing debts, and restrictions on loan tenure.

    "Those are parameters that (the Monetary Authority of Singapore) sets, and those parameters you can calibrate as you go along. But the framework, I think, is the right framework," said Mr Khaw.

    This stance is in line with the market's expectations that the TDSR is here to stay, said R'ST Research director Ong Kah Seng.

    Chris International director Chris Koh noted that, if prices keep falling, next June will mark two years of decline.

    "If the total decline is substantial, it would be timely to tweak some of the measures," he said.

    JANICE HENG

  2. #2
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    Default Resale price slide: Gently does it

    http://www.straitstimes.com/archive/...es-it-20141231

    NEWS ANALYSIS

    Resale price slide: Gently does it

    Consumers will find it easier to accept single-digit fall, and not cut spending

    Published on Dec 31, 2014 1:27 AM

    By JANICE HENG


    NATIONAL Development Minister Khaw Boon Wan has made clear what he wants for the Housing Board resale market next year: a slow price fall, just as in 2014.

    Specifically, he wants a fall of less than 10 per cent.

    As he told reporters on Monday: "I love single digits. I'd be very worried about double digits."

    Bringing down the once-soaring market has been the aim of the authorities for the past few years, after public unhappiness with high home prices boiled over during the 2011 General Election.

    This has been done by raising flat supply and having cooling measures such as loan curbs. As a result, resale prices are expected to have fallen by between 5 per cent and 8 per cent for 2014.

    But why is it so important to bring prices down slowly and gently? For Mr Khaw, avoiding the dreaded double-digit drop seems at least partly about psychology.

    "Single digit (change)... is something that the human mind can adjust to, and employers, employees, and the environment, the economy can adjust to," he said.

    "I think single digit (change) allows human beings and society to make a very nice, smooth adjustment without this huge cliff effect."

    Property experts agree. Said PropNex Realty chief executive Mohamed Ismail Gafoor: "Psychologically, it is going to upset people if it is double-digit."

    This is particularly because the current fall is deliberately engineered by the Government, not caused by an economic downturn.

    A double-digit fall is less acceptable in this case, said ERA Realty key executive officer Eugene Lim. Upset home owners would be a problem for the Government if their unhappiness translated to lost votes.

    "If people feel their homes are losing value, they will start looking for someone to blame," said SLP International Property Consultants head of research Nicholas Mak. In the case of this engineered price fall, the blame would fall squarely on the authorities, he said. In addition, there is also a more concrete danger - to the economy itself.

    If home prices fall too much, "owners would feel that there is a decline in wealth and would tend to spend less", said OrangeTee managing director Steven Tan.

    The fall in consumer spending would hurt economic growth.

    The Government thus has to tread a fine line between reining the market in and dragging it down too far.

    But might the spectre of past anger over high prices make the Government particularly reluctant to relax its cooling measures, in case the market flares up again?

    Experts do not see this as a particularly plausible interpretation.

    The Government is probably prepared to tweak the cooling measures before the next election, said Mr Mak.

    Mr Khaw himself, on Monday, said that how and when to relax cooling measures will be a topic for the new year.

    The fact is simply that prices, particularly in the private housing market, have not fallen that far yet.

    This points to a bigger reason that Mr Khaw might fear a double-digit drop - a fall of that size could mean that the market is truly suffering.

    He said as much on Monday, when he noted: "Drastic corrections are seldom good because those are usually (due to some) external event."

    In the absence of an economic recession or external shocks, experts do not expect HDB resale prices to fall by more than 8 per cent in 2015.

    A double-digit fall would mean that things have not gone according to plan - something that, quite understandably, anyone would want to avoid.

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  3. #3
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    Default Single-digit fall in HDB prices next year a good thing: Khaw

    http://www.businesstimes.com.sg/real...ood-thing-khaw

    Single-digit fall in HDB prices next year a good thing: Khaw

    Lifting of some temporary cooling measures will be "issues for consideration" in 2015, but TDSR will stay

    By Lee Meixian

    [email protected]@LeeMeixianBT

    30 Dec


    ANOTHER single-digit fall in public housing resale prices next year would still be manageable and "a very good development", Minister for National Development Khaw Boon Wan said on Monday.

    It is a level people can accept and a balance between keeping homes affordable for homebuyers and preserving the asset values of home owners.

    Mr Khaw said this to reporters at the handover of the fifth completed block at the new Waterway Woodcress build-to-order (BTO) project. This also marks the Housing & Development Board (HDB) meeting its target of 28,000 new flats for 2014 - a record in recent years.

    HDB resale prices as at Q3 2014 have fallen 6.1 per cent year on year. Mr Khaw said he would be worried if prices fell double digits in 2015 - what he termed "drastic corrections" which historically only happened in response to major external shocks such as the Asian financial crisis, the Sars outbreak, or the global financial crisis in the recent decade. HDB resale prices are widely seen as providing the baseline for mass market private home prices.

    Lee Nai Jia, associate director of research at DTZ, believes a double-digit decline is unlikely, given that the Ministry of National Development (MND) is cutting its launch of new flats to 16,900 next year, from the 22,400 it launched this year.

    The scaling back was because "we can't carry on like this and there is no necessity to carry on like this", said Mr Khaw, referring to the huge supply resulting from the ramp-up in BTO building activity since 2011.

    Dr Lee said: "Besides BTO supply, the government also has quite a few tools to moderate the fall in prices on the demand side, such as subsidies, increasing the income ceiling, and relaxing of restrictions on singles buying public housing."

    Other analysts also see the reduction of BTO supply as a sign that the government is preparing to slow the decline in HDB resale prices, creating something like a "soft landing".

    Mr Khaw also broached the possibility of lifting some of the temporary property cooling measures, which most analysts take to mean buyer's and seller's taxes. "When the temperature becomes warmer, we have to adjust. Question is: when do you do that and how do you do that? So those are obviously issues for consideration next year," he said.

    Knight Frank Singapore executive chairman Tan Tiong Cheng said: "As much as I think cooling measures have served their purpose, sometimes you can't just pull the brakes and hope the thing will stop in time. So it's good to look at the intended or unintended effects of the measures, and review whether some of them should be moderated."

    But Mr Khaw made it quite clear that the total debt servicing ratio (TDSR) framework, which caps borrowers' total monthly debt repayments at 60 per cent of their gross monthly income, will stay.

    The Monetary Authority of Singapore had similarly indicated when it introduced the framework in June 2013 that the TDSR was "structural in nature and meant for the long term". That said, the loan-to-valuation limits for housing loans are not permanent and will be reviewed according to market conditions.

    While recognising the TDSR as a healthy rule that encourages prudence, the market has also singled it out as the tool having the most impact on property buying sentiment.

    "I think TDSR is not a wrong framework. In fact it's a good framework which now several other central banks are also taking note of and some have already implemented their own versions," Mr Khaw said.

    Earlier this month, for instance, Australia's prudential regulator asked banks to limit growth in home loans to investors to 10 per cent a year, and said it will step up overseeing of mortgages amid surging house prices in Sydney and Melbourne.

    But DTZ's Dr Lee believes that any review of loan-to-valuation limits in the short term is unlikely, even if interest rates increase next year because, at 72 per cent, Singapore's proportion of housing debt to GDP is still rather high.

    Taking stock of his term, Mr Khaw said he had taken a very decisive step to shift the market's balance between buyers and sellers when he joined MND three years ago. "At that time, it was a little bit too predominantly a sellers' market. Now the balance is shifting (to a buyer's market) and we expect it to continue to shift next year. I don't think it has stabilised yet," he said. Greater stability may come next year.

    Having cleared the first-timer backlog of demand for new flats, Mr Khaw said his focus in 2015 will be on singles and low-income families who cannot yet afford flats and are renting. The MND will also refine its policies to meet the housing needs of married couples hoping to live with or close to their parents, as well as seniors who want to monetise their large flats.

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