Varied market response to declining property prices

Home prices in both the private and resale HDB markets have continued to dip in the second quarter of 2014. In the first three months of the year, the decline was 1.6 per cent. Perhaps buoyed by the increased number of launched in Q2, the rate of decline was somewhat less steep at 1.3 per cent the quarter past.

Rezi 3 TwoBuyers who have been on the lookout for opportunities such as this may be happy to find that more than a few property developments have been offering discounts. Though the overall number of sales have picked up in the second quarter, mostly due to new launches, the private homes market saw a more obvious slowdown in both the city centre and suburbs. The drop was 1.5 per cent in the city centre and 1.1 per cent in the suburbs. Properties in the city fringe fared better with a 0.6 per cent drop, an improvement considering the 3.3 per cent dive in the earlier part of the year.

But there are those who are concerned about the longevity of their investment should they purchase now. The question they may ask is, is this the lowest prices can go? If I were to buy now, will the prices continue to drop? Though property analysts are doubtful that the prices will bottom out anytime soon, they are expecting the maximum of a 5 per cent decline.

As long as the supply continues at a steady pace, prices will not vary far from the current levels. Perhaps true change will only come with a shift in policies. Considering the elections will be here in a couple of years’ time, the time leading up to that might be a period of uncertainty.

Property cooling measures will remain for now

Ever since the Total Debt Servicing Ratio (TDSR) framework was implemented a year ago in June 2013, the home financing front has taken a big hit. But the authorities are not ready to loosen the reigns on the cooling measures just yet.

The Ministry of National Development (MND) is taking its role in “ensuring a stable and sustainable property market” very seriously indeed. Besides the debt servicing framework, it has also increased stamp duties on second and subsequent property purchases, coming down hard on speculative property-buying.

Eight RiversuitesConsidering the fact that home prices have almost doubled in just four years’ time, the word ‘inflation” does not even cover the extent of the increase. With the rate of increase, especially in mid-2009, the authorities may be rightfully wary of the reverse effect should the measures be lifted now. Prices might very well rocket even higher and then there will be no bringing it back down. And that may impact the social and economic tensile strength of the young nation.

On the other hand, the interest rates at the banks are low for now, and it is an incentive for taking out loans. But with the TDSR framework, how many qualify for these loans and will Singaporeans now look outside of Singapore to invest instead? How will that impact Singapore and her plans to become a global city?

HDB resale flat sales flat

Prices and sales of HDB resale flats have not gone down that drastically, though COV prices are now almost non-existent, but they have remained flat for the last quarter.

April marks a slight rise in the number of resale flats sold, 4.4 per cent up from March. This could be a sign buyers are coming back to the market after having observed the market for almost 3 quarters now and having held out in wait of market stability. As the frequency of BTO flats  launches slow down, buyers who are still in search of a flat which suits their needs, may it be price, location or size, could be more willing to purchase on the resale market now.

Resale 5-room HDB flat on King George's Avenue with asking price of more than $700,000.

How will the HDB market perform in the upcoming months? Analysts and experts are expecting prices to fall very slightly before stablising in the third quarter of this year. Overall, prices for most HDB flats fell, with the exception of executive flats of course. A 1.2 per cent rise was recorded for that sector.

With rents also coming down, mainly due to the decreasing demand as the foreign workforce diminishes, buyers of HDB flats are also more likely to think of their purchase as a long-term home occupation investment rather than to count on profiting from rentals.

The second half of 2014 and the first quarter of 2015 would be an interesting time for the HDB resale flat market, a time to find their footing and possibly find ways to turn itself around.

68% drop in private home sales

In comparison to 2013′s Q1 home sales figures, the chasm is deep. And so are moods in the real estate market.

Private home sales have been on the decline for some time now. And recent figures are not exactly uplifting. Buyer sentiments are pessimistic, as the loan curbs implemented last year takes its toll on buyers and sellers alike.

Hillford Retirement Home
It has become much harder for buyers to secure loans, with the Money Authority of Singapore’s Total Debt Servicing Ratio framework in place. Buyers can no longer loan as much as they would like, which may place them just out of reach of their target property. The lack of new property launches this quarter has also dampened the mood somewhat. And property developers have been slow in introducing new units into the market as they are now accutely aware of a softer market.

Some properties nevertheless have beat the odds and continued to enjoy brisk sales. Topping the list is the 281-unit The Hillford in Jalan Jurong Kechil. Since its launch in January, units have been completely sold. Next up are a couple of neighbouring properties in Sengkang – Rivertrees Residences and Riverbank @ Fernvale. Most of the units went for an average of $1,000 to $1, 100 psf. Industry analysts are wondering if this could signify that buying power for suburban private properties will now hover around this ceiling.

Rivertrees condoThe rest of the year may see a tussle of prices between new and resale properties. As developers cut prices to make sales, resale home sellers may be forced to face the competition head on.

Real estate market fluctuations hard to predict

It might be a matter of long and in-depth research. Or perhaps a intuitive touch to reading the markets. Maybe it’s a matter of luck. Whichever it is you possess, perhaps even a combination of all three, the property market has always been a delicate and somewhat temperamental creature to handle. As we reach the end of the first quarter of 2014, many may be wondering if this year of the horse may gallop into the horizon or merely trot on the spot. The three factors creating the most effect on the current real estate market are:

  • Property curbs
  • Weak demand
  • Oversupply of homes
Property-related rules may be updated often, thus it would be helpful to keep track of new or amended rulings.

Where are home prices headed?

For buyers looking for a place to live, it might be a good time to jump in. Those waiting for a market crash to scoop up the best deals may be waiting in vain as that is rather unlikely. Singapore’s growing population will make for a constant demand for housing, and since home buyers usually have a fixed idea of which areas they would rather live in, other factors such as location, proximity to transport and schools, may still determine the price they pay.

Property upgraders may find themselves in a good spot as well. As the private property market becomes increasingly competitive, the price difference between their current and desired property may be diminishing, thus in turn save them a rather substantial amount.

Property investors may be those finding themselves most in a bind as mortgage limitations and rising interest rates create boundaries which may hinder their progress. Analysts advice against hasty decisions as properties may not be the easiest to manage within an investment portfolio. They suggest that investors look at all possible angles when considering a property, such as the number of bathrooms, size and shape of the unit, hidden spaces which may not suit the taste of most buyers etc. All-in-all, investors need to plan for future interest rate hikes, the possible lack of tenancy, financial holding power and governmental policy changes.

Less investing in private homes

Overall home prices have been losing steam, with significant signs showing in the last quarter of 2013. Mass market private home prices have begun to soften and investors are generally shying away from private properties. Upmarket luxury properties however might be the hardest hit as big funders who had previously purchased units in bulk choose to wash their hands of their investments early. Newton Imperial condominium is one example, with 21 units being put up for bulk sale earlier this month.

Hillford Retirement HomeSome investors may however choose to hold on to their properties and tide over the property cooling period. On the ground, city centre home prices have already fallen, and city fringe homes may follow suit. Individual buyers may be waiting for further price cuts or discounts from developers, thus widening the void in the market. But the market can hardly stagnate as activity will no doubt continue, though at a slightly more subdued level.

Some analysts are predicting the ebb and flow of the private property market this year to be highly dependent on the type and number of new property launches. As that too may be lower in number, one may wonder if 2014 might be a dull year for the real estate industry. But the first quarter of the year may bring about some positive change. The launch of The Hillford at Jalan Jurong Kechil earlier this month for example, sold out within its launch day with prices averaging $1, 100 psf.

Resale flats still awaiting buyers

Despite the fact that resale HDB flat prices have been on the downward slide for 2 quarters now, the number of resale flat transactions have not yet picked up. One might think the lowered COV prices might bring in the buyers, but perhaps it might be time sellers reconsider their asking prices.

Resale flats in the newer towns such as Sengkang and Punggol have seen the lowest COV prices thus far, with some sellers even willing to sell under valuation, with the lowest being $5,000 below valued selling price in December last year. The highest COV was for a unit in Marine Parade, with a COV of $40,000. Popularity of the unit, plus many other environmental factors, condition of the flat, and competition from buyers all determine how much cash over valuation the seller could demand.

Queenstown-HDBThe first half of 2014 might see a delicate tango between resale HDB flat sellers and buyers as buyers hold off in wait of possibly further reduction in market prices, and sellers doing the same as they wait for lowered prices in the private property market and to see if demand picks up in the later half of the year. As 2013 was the year of announcements, with new MRT stations and bus routes being planned, new redevelopment areas and township rejuvenations, much of the hype might be past. Is 2014 the year where the dust settles and the property market solidifies pockets of positive and negative performers?

Home prices down all around

Landed. Non-landed. Private. Public. Across the board, prices of all residential properties seem to have taken a hit in the last quarter.

Prices have dipped, some sectors more than the others, but signs are pointing to a possible slowdown in the market due to governmental curbs and the increased number of new property launches over the last 2 years. With the last price decline registered in 2005, resale HDB flat prices have been on the downhill slope for 2 quarters now. Private property prices have also suffered albeit to a lesser degree, with the lowest prices since 2009.

Mon JervoisMight it truly be the buyers’ market this year? Will this prompt more buyers to jump on the opportunity or are there other factors which might keep them away from the cash register? The tighter loan restrictions such as shorter loan periods, lower debt-to-income limits, and higher stamp duties may still be an obstacle to some buyers, thus sellers eager to cash in on their properties may find themselves having to wait a little longer for a good deal to come by.

Location usually still trumps all, though considerations such as space, amenities and living environment all have a part to play in the final selling price. With more new private condominium launches and new HDB flats pushing their way into the market this year, competition on the rental front is proving tough as well. Buyers now have more options for comparison and may be tempted to wait for prices to drop even further or wait it out for the best deal.

Even prices of suburban private homes, which have been the main stalwart of the property market last half of the year, have slipped 0.6 per cent. And as resale HDB flat prices drop, so have the number of HDB upgraders who may require the cash from the sale of their flats to purchase private homes. In turn, demand for mass-market suburban homes may fall.

Will it be a sombre year for Singapore’s residential property market?