SINGAPORE – With double-digit gains in Singapore’s private and public home prices last year outpacing the country’s preliminary 2021 gross domestic product growth of 7.2 per cent, the latest property cooling measures are timely.
This is especially so as household debt increased by 6.8 per cent in absolute terms over the past year, and any steep correction in property prices could ripple across the economy.
And with interest rates poised to rise this year, the recent tightening of the total debt servicing ratio for borrowers is aimed at ensuring that households are not overstretched. This, in turn, should protect banks against excessive financial risks, especially those with high exposure to real estate debt.
Private home prices surged 10.6 per cent last year – the highest annual growth recorded since 2010 when they climbed 17.6 per cent – due to a low interest rate environment, ample liquidity and optimism over Singapore’s economic recovery. In tandem, HDB resale prices jumped 12.5 per cent last year – also the highest annual growth recorded since 2010 when prices rose 14.1 per cent.
But the new property curbs that took effect on Dec 16 should moderate price growth across private and public markets, analysts say.
Private home sales volumes are expected to slow as some buyers hold off.
Case in point, only 12 units at the 230-unit freehold development Perfect Ten in Bukit Timah were sold as at Jan 2, at an average price of $3,268 per square foot, according to CBRE. This is despite Hong Kong developer CK Asset Holdings offering a one-time, 5 per cent discount as a sweetener over its launch weekend on Dec 19.
But the sellers’ market is unlikely to turn into a buyers’ market overnight.
With unsold home inventory now at record low levels, land and construction costs climbing, and housing demand still underpinned by Singapore’s recovering economy, developers are not expected to cut prices significantly at this juncture.
According to JLL, unsold inventory stood at 17,165 units as at the third quarter, having dropped from 37,799 units in the first quarter of 2019. “There is therefore less pressure for developers to reduce prices, especially if they are in a healthy financial position,” said Mr Ong Teck Hui, senior director of research and consultancy at JLL.
OrangeTee & Tie’s senior vice-president (research & analytics) Christine Sun noted: “If the developer has cleared most of its units in the project, then it may not be in a hurry to offer more discounts to clear balance units.”
So most analysts do not see a sharp correction in prices. “Overall price growth could moderate to between flat and 2 per cent for 2022, down from earlier forecasts of between 4 per cent and 6 per cent growth,” said Mr Wong Xian Yang, head of research for Singapore at Cushman & Wakefield.
Price growth in the city fringe and suburbs, which jumped 7.3 per cent and 5.4 per cent respectively, could slow to between flat and 2 per cent this year, Mr Wong added.
“While demand from owner-occupiers will sustain prices, investor demand in these two segments, which is driven mainly by Singaporeans, should slow,” he said.
For the prime districts, sales volumes and prices could be harder hit due to the new curbs taking a bigger toll on investors and foreigners, said Ms Tricia Song, CBRE’s head of research for South-east Asia.
These include higher additional buyer’s stamp duty rates – up by 5 to 15 percentage points – for all individuals and entities except Singapore citizens and permanent residents buying their first residential property.
“But prime area prices are unlikely to collapse due to the strong economic fundamentals, low unsold inventory and delays in construction driving up occupancy and rents,” she added.
With fewer new private homes expected to be launched for sale this year, sales could drop back to between 9,000 and 10,000 units from about 13,000 units in 2021, analysts say.
According to Huttons, there may be up to 43 new private residential launches comprising 5,507 units in 2022.
Meanwhile, the strong run-up in HDB resale prices to an 11-year high last year cheered many flat owners who have endured six years of declining resale flat values from 2013 through 2018.
But the pace of price growth will likely slow to between 6 per cent and 8 per cent this year due to the new measures and the HDB ramping up supply of new Build-to-Order (BTO) flats over the next two years, said Ms Wong Siew Ying, head of research and content at PropNex Realty.
But HDB resale demand should remain healthy as many first-time buyers or upgraders are least affected by the new measures, she added.
Conditions that fuelled the buoyant HDB market last year may also persist. “These include construction delays and extended waiting time for BTO completions, as well as the tight supply of new mass market private homes and firm private home prices in the suburbs, pushing buyers to the HDB resale market,” Ms Wong said.
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