Posts Tagged ‘Singapore’

Forecasts On the Singapore Residential Real Estate Market

October 10th, 2013

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It seems that residential properties in Singapore are up for a price decrease in the near future. Various banks, real estate firms and property consultancies have already weighed in. Savills predicts a price dip of about 3 to 5%; Knight Frank predicts a 5% decrease. Meanwhile, Mizuho believes that Singapore housing prices will drop by 10-15% in the next 3 years.

Analysts at Barclays forecast that prices will remain stagnant for the rest of the year, then drop by 5% the following year. In 2015, prices may fall even further, possibly by as much as 15%.

The Urban Redevelopment Authority reports that several public and private residential developments are under way, set to be completed by 2014 and onward. In the next 5 years, over 9,000 new private residences will be available, as well as more than 25,000 public housing units yearly. Seeing that an average of only 15,500 private residences are bought in Singapore yearly, vacancy rates will increase. When this rate hits 8%, prices will dip.

With an expected boom in available residences within the next two years, Barclays explains that interest rates are likely to rise. As interest rates go up, history suggests that property prices will go down.

The Ministry of National Development anticipates that when interest rates normalize, it may lead to huge risks for borrowers. This will thus affect Singapore’s economy. Minor price adjustments must be made, so as to prevent a significant price drop.

Effects of the New Property Market Regulations

The Singapore government has revamped the regulations on the real estate market – a total of 9 times in the past 5 years. The new measures were intended to regulate the prices of Singapore real estate. The result is a tempering in price increase but overall the market has remained buoyant.

The latest amendment was made just in August. It related mostly to public housing, which provides homes for 80% of the population. More stringent restrictions have been introduced, such as a shorter loan tenure and a lower debt ratio. This is quite unfavorable to borrowers. A decrease in resale prices and COV of HDB flats home sales were thus seen. According to HDB’s flash estimate of the resale price index, prices declined by 0.7% for the 3rd quarter 2013 – the index has not experienced a quarter-on-quarter fall since 1Q2009.

Various Possibilities

Some experts expect that the HDB market will be hit the hardest. Others believe the private residential market will, since property buyers are likely to invest elsewhere. Nonetheless, the rest of the real estate market will be affected. It is generally believed that prices will fall, anywhere from 5 to 20%, until 2015. This goes for both public and private housing.

There has been no significant price drop as of yet. Still, URA data reveals that prices of apartments in upscale areas already dipped. Prices in suburban areas rose, but are still lower than last year’s. The HDB reports that the resale price for HDB flats already fell as well.

The HDB observes that the real estate market is slowing, and may likely grow more sluggish for the remainder of the year. Barclays reports that sales are already significantly lower compared to last year’s figures. This year’s sales are estimated to be 30% lower than last year’s.

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Home Buying Trends

Central Bank data shows that housing loan applications have decreased since last year. This is the lowest in four years.

Jones Lang LaSalle notes that home-buying trends are changing. Fixed-rate mortgages are now more preferable among buyers, since it allows some protection against a sudden interest hike.

Home buyers are now more restrained. This is partially since home loans have grown pricier in the past year. With the new government regulations, buyers think twice if their DSR is over 60%. In addition, there are higher down payments, and additional taxes. There are also restrictions regarding second mortgages, and a higher cash down-payment. In summary, home-buying is more complicated, and this seems to discourage many.

There are also limitations on Permanent Residents and foreign buyers. PRs who prefer to buy HDB flats will not likely opt for the more expensive private residences. However with the new ruling that PRs have to wait three years after attaining their PR status before they can buy a HDB flat, this may drive some demand to the private housing segment or the rental market.

Foreign buyers meanwhile have somewhat dwindled.

Concerning Developers and Investors

There have been restrictions on buying land as well, impeding property development. Currently, land prices are high, and a purchase at these times is less than ideal.

It may seem good idea to build more and more homes, but there is a problem if there are no buyers. Mizuho Bank’s experts point out that a price correction will be necessary. That won’t be favorable for developers.

Many developers hope to attract buyers with discounts.

SLP Singapore predicts that developers will sell more residences in the following months, but possibly at a slower pace. Savills PLC is certain that developers will be more restrained about buying land for new projects.

Yearly rental rates currently average at roughly S$521 per square meter. Jones Lang LaSalle expects this to decrease as investors become cautious. Only very well-to-do investors will dare to purchase Singapore housing. Capable resale buyers may be hard to come by. In a price slump, investors may even want to dispose of their properties immediately in the secondary market.

With prices anticipated to head south, house-hunters, what better time to buy than now or in the next few months? Seek the free advice of iCompareLoan mortgage experts who will help you compare Singapore home loans.

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