Experts predict steady prices due to stable employment, low interest rates
Oct 13, 2012
By Esther Teo, Property Reporter
Home prices are likely to hold their ground despite being pummelled by six rounds of cooling measures, according to most property analysts.
They pointed to low interest rates and a stable employment outlook as factors supporting prices.
They predicted the measures - including last week's new restrictions on loan terms - would take a toll on sales volumes. However, another factor helping to keep prices steady is the strong holding power of developers.
Some contrarian analysts said prices might fall by up to 10 per cent in the next 12 months.
But most agreed that private home prices are likely to continue flatlining instead. They have risen by less than 1 per cent in the first nine months of the year.
The measures announced by the Monetary Authority of Singapore last Friday included caps on loan terms to prevent buyers from over-extending themselves, and lower loan-to-value (LTV) ratios for certain purchases.
They were also meant to curb rising home prices driven by low interest rates and easy credit coming from a fresh round of cash stimulus in the US and Europe.
OCBC analyst Eli Lee said the measures are likely to have a muted impact on prices. He pointed to healthy sales at recently launched eCO in Bedok South last weekend, while a recent Credit Suisse report said the measures are "unlikely to have a major impact on prices in the near term".
Mr Colin Tan, research head at Chesterton Suntec International, said sentiment might be affected in the short-term as buyers take a wait-and-see attitude. While volumes might take a hit, prices are likely to remain stable, he added.
A report by Deutsche Bank analysts Gregory Lui and Elaine Khoo said aggressive moves by developers to sell housing stock is unlikely given the significant number of homes already sold this year.
"For buyers, affordability, while weaker, is still comfortable with mortgage rates low. Therefore, we do not expect a significant decline in prices with a base case of 5 to 10 per cent drop."
Still, a few analysts did not rule out the possibility of prices taking a tumble. UOB property analysts Vikrant Pandey and Vijay Natrajan said the measures are likely to crimp investment mass-market demand in the near term.
The market is likely to see a 20 to 30 per cent moderation in volumes and an 8 to 10 per cent fall in prices over the next year.
"There could also be a demand shift towards smaller mass-market products, strata retail and commercial properties, and alternative high-yield investment vehicles," they added in a report.
The experts held varying views over how the high-end segment might be affected. Some said the higher cash upfront required for these pricey homes could further slow the segment.
However, others pointed out that these home buyers are typically cash-rich and do not take out large loans.
Deutsche Bank's Mr Lui and Ms Khoo added: "While the cut in the LTV ratio to 40 per cent could deter non-individual investors, the number of private funds and foreigners in this segment had already declined after the additional buyer's stamp duty (last December)."
However, the Credit Suisse report said that investment demand for larger-ticket properties will likely soften in the near term.
"Residential developers could experience some knee-jerk reaction from the new measures, which could further slow property demand, especially for prime properties due to the higher down payment required or higher instalment on an already high base," the report said.
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