Saturday, January 15, 2011

Impact on prices likely only after Q1

HOME prices are expected to take a tumble this year on the back of tough new cooling measures unveiled by the Government on Thursday, although top-end homes might be immune.

Some analysts are predicting suburban home prices to fall by as much as 10 per cent after a significant run-up in the recent red-hot market.

Any correction, however, is likely to emerge only after the first quarter of the year. Price falls often come only after a prolonged stand-off between buyers and sellers, they add.

Most experts agree any further rise of prices will be halted at least temporarily as buyers adjust to the measures.

But they added that continued low interest rates and strong confidence in the economy and property market might counter any prolonged dampening impact.

The measures unveiled include a higher seller's stamp duty of up to 16 per cent applying to up to four years after date of purchase.

Research firm Kim Eng said the mass market segment remains the most vulnerable, adding that prices could fall by up to 10 per cent over the next year.

Buyers in the mid- to high-end segment tend to have deeper pockets. But even then, higher stamp duty may cap price appreciation now, it added.

DMG & Partners property analyst Brandon Lee also expects a 10 per cent correction for mass market homes, where buyers usually take on larger loans and are more price-sensitive. He believes this will come in the second half of the year.

However, Mr Lee expects high-end property prices to hold steady owing to their limited supply and the strong holding power of such developers.

But not all experts agree that mass market homes will be the worst hit. Cushman & Wakefield's senior manager for Asia-Pacific research Ong Kah Seng says prices in this segment are unlikely to fall immediately, as they are underpinned by genuine demand and the economy's strength.

However, this could change if there is prolonged resistance to home buying, he added.

UOB Kay Hian property analyst Vikrant Pandey has drastically cut his price forecast for this year from up to 3 per cent growth to a 5 to 15 per cent correction. He also expects sales volumes to fall by up to 35 per cent.

'The seller's stamp duty hike is the most severe unanticipated measure and would instantly dry up speculative transactions that make up around 8 per cent of total housing transactions and will cause a major slowdown in the secondary market,' he said.

A day after the market was stunned by the tougher-than-expected measures, analysts say only first-time homebuyers and those without outstanding home loans have emerged unscathed. They can look forward to property prices taking a dip from their record highs.

Property developers and disgruntled owners looking to sell their homes, however, will have to adjust to a shrinking buyer pool as many take a wait-and-see approach on their purchases.

Mr Chia Boon Kuah, chief operating officer of property sales at Far East Organization, said that the firm is presently reviewing some of its business programmes to build a stronger base of long-term buyers. 'We will roll out our launches as and when ready,' he added.

CapitaLand chief executive Liew Mun Leong said at a public lecture at National University of Singapore yesterday he expects sales volume and home prices in all segments, except at the top-end, to fall.

Boutique developer EL Development managing director Lim Yew Soon, who is planning to launch SkySuites 17 at Balestier in March, said he will watch market reaction closely in the next two months.

'If the reaction is not so strong then we may proceed as planned but if the market quietens down then we may postpone it to a later date,' he added.

Even if the firm was willing to drop the launch prices, they cannot fall much lower since there were already many other costs to consider, Mr Lim said.

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