Property prices to correct by 5-6% this year

Time to tweak some measures, says analyst.

According to PropNex, after a tumultuous year that saw the most severe set of property cooling measures and lending curbs implemented by the government, private homes prices may fall further.

According to the flash estimates released by URA today, private home prices in Singapore continued to fall in 1Q14 as government interventions crimped real-estate investment. The private residential property price index fell 1.3% in 1Q14 to 211.6 points—this is the second consecutive quarter of decline and could herald further price falls this year, when large supplies of new homes are expected to reach the market amid a possible rise in interest rates. 

Mass-market homes in the OCR saw prices declining by 0.3% while RCR prices fell by 2.8%. For the fourth consecutive quarter of price decline, CCR properties also saw its prices continued dipped by 1.3% in 1Q2014 flash estimate results.

"By now, we are convinced that the private residential market has turned the corner and is entering into a consolidation phase with reduced transactional activity and prices under pressure," said Mr Mohamed Ismail, CEO of PropNex Realty.

"The various government measures have effectively curtailed demand from all groups of home buyers," he added.

“The demand for private homes might also be affected by the drop HDB resale prices. This possibly deterred sellers who are looking to sell their HDB flats and upgrade. The smaller gain achieved from the sale of their HDB will limit their budget for their new private property and may cause some to put their plans on the backburner because the potential profit is insufficient to allow them to upgrade.”

Buyers and investors will be more cautious resulting in a more subdued demand and weaker sales volume. Prices are widely expected to show a modest decline or remain flat. Mr Ismail said he expects prices to cool further over the course of this year and next, but it will remain resilient in the long term."We expect prices to remain relatively stable with a bit of downward pressure in the firsthalf of 2014.

Developers will adjust their launch prices to match the current inertia in the market, but will not drop prices too much due to the high price in which they have secured the land.

Similarly, I believe secondary resale prices will take cue from the primary market in a bid to attract buyers. In addition to the weak market sentiments, the large oncoming supply and various measures in place will work to further dampen demand.

We are looking at an around 5 to 6% correction for the rest of the year, but it won't be a knee jerk fall. The round of cooling measures clearly impacted the market, I think it is timely to tweak the Additional Buyers’ Stamp Duty (ABSD), while maintaining the Total Debt Servicing Ratio (TDSR) which was intended to ensure buyers’ financial prudence," he concluded.