It points to uncertain economy, labour market and unsold stock
Prospective home buyers should take extra care before taking on a mortgage given the uncertain economy and softening labour market.
The warning from the Monetary Authority of Singapore (MAS) yesterday also pointed to the large supply of unsold units that could weigh on the property sector.
The regulator noted that the number of unsold homes from launched projects – excluding executive condominiums (ECs) – doubled from 2,172 units in the third quarter of last year to 4,377 units in the same three months this year. It added: “This increase will likely be exacerbated in the medium term as developers continue to launch projects on sites arising from the large volume of en bloc sales from 2017 to last year.
“The increase in the unsold inventory could place downward pressure on prices… if unaccompanied by a corresponding rise in demand.”
And investors who borrowed at higher mortgage rates, relative to incomes, “could face difficulties meeting the repayments on their investment properties”.
The property sector update was contained in the MAS’ annual Financial Stability Review released yesterday. It noted that the cooling measures imposed in July last year have moderated the private real estate market. Prices have moved more in line with economic fundamentals compared with the first half of last year, while overall transaction volumes have dropped and developers are more cautious when bidding for land.
While relatively healthy sales were recorded in selected project launches over the past two quarters, this was largely due to specific features such as a project’s good location, the MAS noted. Other projects saw moderate sales in the initial phase of their launches,it said.
The volume of private home resales has also remained modest compared with levels before the cooling measures came in, it added.
Private home prices increased by 2.1 per cent year on year in the third quarter, well under the 9.1 per cent jump in the second quarter of last year, which was before the cooling measures.
Overall sales of private homes increased in the past two quarters. This was led by sales of new homes – excluding ECs – which surged 40 per cent in the third quarter compared with the previous quarter.
The MAS noted that overall transaction volumes in the past four quarters fell 32 per cent compared with the 12 months preceding the cooling measures in July last year as resale activity continued to be muted.
The share of purchases by companies accounted for 1 to 2 per cent of total transactions over the past three quarters, while sales to foreigners comprised 5 to 6 per cent.
Outstanding housing loans dipped by 1 per cent in September compared with the same month last year. New housing loans rose in the past two quarters, in line with the increase in transaction activity, but they remain lower than the period before last year’s cooling measures, the MAS noted.
“Source:[MAS flags loan risks amid rising home supply] © Singapore Press Holdings Limited. Permission required for reproduction”