Friday, January 14, 2011

Property measures will stem demand for now

THE property cooling measures announced yesterday will effectively halt buying activity from property investors across the private market - at least for the time being.

Market analysts that The Straits Times spoke to said the drastic measures will make investors reassess their finances and think twice before signing on the dotted line.

Developers are also widely expected to postpone their property launches and may lower their prices to lure buyers back to the market in the coming months.

Yesterday's measures, which included raising the seller's stamp duty to a hefty maximum of 16 per cent of the purchase price, and lowering the amount banks can loan home buyers for a second property to 60 per cent of the property's value, were described as 'punitive' by analysts.

Property consultancy International Property Advisor's (IPA) chief executive Ku Swee Yong said the move was a 'sledgehammer' that came as a surprise to the industry.

'Many of our clients who are genuine investors are now re-assessing their loans situation. The market will be frozen stiff for a while,' he said.

And for sellers who buy a private property from today onwards but genuinely need to dispose of their properties in the short-term, such as those who have suffered losses in business or who have fallen critically ill, the stamp duty will 'cripple them completely', he added.

Property investor S.K. Cheah, 42, who is self-employed and already owns a few investment properties, said that genuine investors will find it hard to come up with the 40 per cent downpayment for new investments.

But he conceded that in the long run, this may be healthy for the market as there are many investors out there who may be heavily leveraged and may get into financial trouble when interest rates start climbing.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said that the industry had somewhat anticipated another round of measures - but not so soon.

The last round of measures, which tightened ownership rules and restricted financing, was announced last August and the market was still reacting to that, he said.

Demand will most certainly be dampened, added Mr Tan, but he noted that investors who are 'comfortably well off' will not have problems forking out a higher amount upfront for investment homes.

Foreign capital inflows into Singapore - a well-known destination for property investment on the international property circuit - could still create demand in the market, he added.

All eyes are on developers now for their next move.

CapitaLand, for example, was expected to launch around 1,700 new homes this year across some projects such as The Nassim, Urban Resort Condominium, The Interlace and d'Leedon.

City Developments and Far East Organization also had new launches slated for the next few months. When contacted, all three developers declined to comment.

Mr Tan said he expects a knee-jerk reaction from developers, who will now most likely postpone these launches.

Mr Lim Yew Soon, managing director of EL Development, said he is mulling over the effect of the measures on his company's Skysuites 17 at Balestier, which is slated for launch in March.

'If the market takes it lightly, our pricing will still meet market expectations. But if the market reacts drastically, based on upcoming launches, we may decide to hold off the launch by three months or so,' he said.

IPA's Mr Ku said developers may have to reduce their asking prices, and may drop them by 1 to 2 per cent initially to test the market.

Although yesterday's measures did not directly address the public housing market, analysts say the measures could also have a trickle-down effect on HDB resale flat prices.

Mr Ku noted that if mass market home prices started declining to the level of sought-after HDB resale flats in good locations, resale flat prices could weaken as buyers look to buy private property instead.

First-time home buyers such as Ms Yvonne Koh, 26, a bank executive, said the prospect of falling prices is music to her ears. 'I just started looking for a home and was deciding between a private apartment and a resale HDB flat. Hopefully the measures will bring prices down to a more affordable level so I can buy sooner rather than later,' she said.

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