Analysts weigh in on policy relaxation expectations.
Market sentiments and buyer interest appear to have softened in October as economic and business conditions have become more difficult compared to a year ago. In October, developers sold 546 private residential units, 60.1% higher than September but 30.4% lower y-o-y.
Moving forward, while most analysts believe property market will remain subdued in the remaining two months of 2015, expectations of policy relaxation may improve sentiment and spark a revival in transaction volumes.
Here’ what analysts had to say:
Celine Chan, analyst, Orange Tee
Cooling measures are expected to remain unchanged for now, interest rates are poised to rise, and the market faces a deluge of incoming supply. Investors’ holding power will be tested in the next few years, as holding costs rise in tandem with interest rates, and rents are likely to remain weak. However, good deals should arise amidst bearish market sentiments, and keen eyed investors should be able to pick up a bargain or two.
It remains our assertion that the Singaporean government is comfortable with the pace of the property market's correction so far, and prefers to see affordability improve further before it begins to ease up on its wide-ranging macro-prudential measures aimed at keeping a lid on prices. These measures include additional buyer stamp duties (ABSDs, up to 15% of the property value for foreigners and 10% for citizens), loan-to-valuation ratios capped at 80.0% for owner-occupied properties (dropping to 50.0% for second properties, and 40.0% for third), and total debt servicing ratio (TDSR) limitations. However, given the propensity for a deeper correction in property prices once the US Federal Reserve begins to normalise its interest rate policy heading into 2016, there is small chance that the government may see fit to ease up slightly on its cooling measures over the coming months, most likely by adjusting the ABSD. To be sure, we do not believe that the government will choose to adjust its policies just yet (and that it will wait for a deeper correction to play out before doing so), but note that if policymakers do surprise with an easing of the cooling measures, the property market could experience a transitory pick-up in activity and price levels.
Ong Teck Hui, National Director, Research & Consultancy at JLL
Notwithstanding the slight improvement in private home sales in October over the previous month, the market generally remains subdued as the effects of the cooling measures have been compounded by the economic slowdown and impending interest rate hike in the US. Market sentiments will remain soft through the year end, so we may expect muted market activity in the remaining two months when the holiday season begins. Using developer sales of 653 units in November and December 2014 as a guide, new private home sales in the last two months of 2015 are likely to taper. With 6,383 units sold in the first ten months of 2015, the full year figure is likely to be below last year’s 7,316 units.
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