http://www.straitstimes.com/archive/...all-8-20150103

Private home prices 'may fall by up to 8%'

Slide expected to mirror public housing market's

Published on Jan 3, 2015 1:08 AM

By Jacqueline Woo


THE slide in private home prices will likely continue this year, possibly at an even greater pace than last year, say property consultants.

They noted that the falls could be as much as 8 per cent - markedly more than the estimated 4 per cent decline in the Urban Redevelopment Authority's private residential price index for the whole of last year.

The movement in the private sector is likely to mirror that of the public housing market, with National Development Minister Khaw Boon Wan saying earlier this week that he hopes last year's slow slide in HDB resale prices will continue this year at a single-digit rate.

Based on preliminary estimates yesterday, the Housing Board's Resale Price Index fell by 6 per cent for the whole of last year while the Urban Redevelopment Authority's private residential property index declined by 4 per cent.

Colliers International said the headwinds facing the private property market - continued enforcement of cooling measures amid the tightened credit environment, a mounting supply of new homes, a weak leasing market and the impending rise in interest rates - are expected to persist through the year.

It predicts that home prices will fall between 5 per cent and 8 per cent this year. This closely matches ERA's view of a 6 per cent to 8 per cent drop.

Other property consultants were less pessimistic, with Knight Frank and PropNex predicting a 4 per cent to 6 per cent drop and a 4 per cent to 5 per cent fall respectively.

Mr Ong Teck Hui, national director of research and consultancy at JLL, told The Straits Times that private home sellers will become "more flexible in their asking prices and, in some cases, face more pressured selling".

PropNex Realty chief executive officer Mohamed Ismail noted that many potential buyers are still "taking the wait-and-see approach, hoping that prices will come down further".

He cited prices for luxury condominium homes in Sentosa Cove that have plummeted to $1,600 to $1,700 per square foot (psf) from $2,200 to 2,500 psf about two to three years ago.

"Right now, the market is to the buyer's advantage. There are a lot of opportunities for them to buy a property at a fair price or even a discount," he said.

R'ST Research director Ong Kah Seng expects price cuts of as much as 5 per cent to 10 per cent at new projects this year as developers seek to move units.

"It's been a while since the Total Debt Servicing Ratio (TDSR) was implemented, and buyer sentiment has more or less stabilised," he said.

The TDSR, which came into effect last June, stipulates that a buyer's monthly debt repayments cannot exceed 60 per cent of his gross monthly income.

The new year spells gloom for landlords as well with a "substantial supply" of new homes slated to come onstream, said SLP International executive director Nicholas Mak.

Almost 21,000 units - landed and non-landed - will be completed this year, up from around 11,700 units in 2013.

Some of the bigger projects that are nearing completion are The Luxurie in Compassvale Road, which has 622 units, and the 590-unit Riversound Residence in Sengkang East Avenue.

"The Government isn't going to ease up on its quota for foreign talent, which means there will be fewer takers on the rental market," said Mr Mak, adding that supply looks set to overwhelm demand.

Consultants also said landed property, especially terrace and cluster homes, as well as developments in the core central region (CCR) are expected to stay weak.

"Those who buy good-class bungalows are mostly wealthy owners who do not need loans but those who buy terrace homes, for example, tend to still need loans to finance their purchases," said R'ST Research's Mr Ong.

"There are also more choices with modern condominiums that have better designs."

Properties in the CCR, which typically attract foreign buyers, have been languishing since the Additional Buyer's Stamp Duty (ABSD) was introduced in 2011, said Mr Ismail.

Under the ABSD, foreign buyers must pay an additional 10 per cent stamp duty on the purchase or acquisition of any residential property.

"Demand for mass-market private residential homes will be a little more resilient due to continued demand from HDB upgraders and sensitive pricing from developers," he said.

The Jurong district could be a bright spark, however, as it grows in popularity among home-dwellers thanks to plans to make the area a business and leisure centre, noted Mr Mak.

"But it is still unlikely to see a fantastic boom in prices, given that there will be few new launches (there) this year."

Other mass-market developments that are well-located - be it near MRT stations, popular schools or major shopping malls - will be the ones that do well, he added.

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