Warning: Price of that dream property may rise

An expert discusses why home buying restriction and buyers' cautiousness may not necessarily mean that prices of all private residential properties will fall.

On the opposite, there could even be a potential for prices to hold.

According to former Cushman & Wakefield senior manager for Asia Pacific research Ong Kah Seng, some properties can have marginal price upside in the short term as homebuyers' cautiousness have meant that each of the potential property seeker will settle for one, or at least fewer home purchases. Hence some of them are instead willing to allocate alittle more premium to their one and only or fewer 'dream' private residential property - which partly explains why prices held on its momentum in the recent months.

Here’s more from Mr. Ong:

Traditionally, prolonged homebuyers' cautiousness and contraction in demand may lead to a fall in property prices, especially if the economic conditions are continually weakened. Similarly, to curb homebuying exuberance, cooling measures to discourage the purchase of subsequent private residential properties may lead to an overall fall in demand for private residential properties and hence keep price increases in check. Recent such cooling measures include lowering the Loan-to-value ratio on housing loans from 70% to 60% for property purchasers who are individuals with one or more outstanding housing loans at the time of the new housing purchase.

However, the restrictions and economic uncertainties which deter more than one private residential purchase may potentially encourage selected home seekers to part more of their money in their dream property. These include home seekers who can actually afford to purchase or own 'two or more' private residential properties but may have dropped their decision for multiple purchases in light of economic slowdown, lower L-T-V ratio available for subsequent homes and the sellers' stamp duty required for the first 4 years of purchase. The sellers’ stamp duty means prudence must be embraced as there is little recourse should one regrets on his property purchase decision.

Hence, some of these buyers who have realigned their homebuying intentions may decide to settle for only one or fewer property purchases, until the economic circumstances have clearer directions.

Private homes, especially newer, well conceptualized ones, may hence continue to see buying interest from such homebuyers. While they may come with price premium , if they meet buyers’ requirements, there are chances for such home seekers to be pay for these features. For the home seeker who can buy more than one ordinary private residential property but have decided to settle for only one or fewer, the eventual residential property which commands about 10% price premium may still be within his overall housing budget.

There is also a perception that such properties have stronger selling or price upside since a handful of them can come with exquisite designs or locational strengths, hence verifying the decision to invest in.

Nevertheless, the availability of such homebuyers is not overly rampant and generally, the cautiousness arising from the economic slowdown and uncertainties will still instill an overall higher level of realism in home buying decisions.

It is home seekers who are not severely constraint by budget or who are fairly financially confident amid the economic slowdown, who will still be encouraged to consider and pay slight premiums for the only home(s) they are interested in.

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