So what's in store for private home prices in 2015?

By The Folks @PropTalk - January 6, 2015 2 Comments

Private home prices fell 1% in the three months to Dec 31 last year, but it came as no surprise to analysts.

The decline was higher than the 0.7% dip in the previous quarter, but experts reckoned that the slowdown was characteristic of the last quarter, thanks to the year-end holiday period, ailing demand and curtailed home financing.

The Urban Redevelopment Authority's property price index for the full year showed on Friday that prices slipped a total of 4% for the whole of 2014 and 4.9% in five straight quarters of declines.

Here are what some market watchers say will be in store this year:

Ms Chia Siew Chuin, director of research & advisory, Colliers International:
The moderated private residential property transaction levels and price corrections are seen as better aligned with the slower rate of economic growth, which has slowed to a weaker-than-expected 2.8% this year - an indication that the market is being steered from a state of excess exuberance seen in the not-so-distant-past towards greater stability and sustainability.

With various downside headwinds expected to keep a lid on home-buying demand, prices of private residential properties are expected to remain on a path of moderation in 2015. These include the continued enforcement of cooling measures amid the tightened credit environment, a mounting supply of new homes, a weak leasing market and the impending rise in interest rates. Barring external shocks and surprises, prices are expected to moderate by between 5% and 8% in 2015.

Mr Desmond Sim, research head, South-east Asia, CBRE:
We expect prices to continue falling but not at a faster rate because developers and re-sellers have not pressed the panic button yet. General indicators of economic activity have still be positive, mortgage rates are still very low - so there's no distress yet.

Our point of view is, no matter how much prices have changed, there have been more sales of between $800,000 and $1 million than any other transaction in the market, so affordability is still there and developers are still creating such products for the market. New launch activity, however, will be like the fourth quarter last year - minimal. Developers do not want to eat into each other's pie when demand is low.

Mr Nicholas Mark, research head, SLP International:
Unfortunately, we could see more of what happened in the second half of 2014 - weak demand in the private housing market and a gradual price decline, unless the Government were to adjust housing policies. The cooling measures are for a stable property market, but there are growing questions over just how much prices should to reach a stable market.

I think the Government should let stakeholders in the market know what is the end point, since we have such a high rate of homeownership here. The group that will be worst hit are investors who have high bank borrowings and cannot sell the property because of the seller's stamp duty. We could see more mortgagee sales this year, as a result. There will be people who will be happy, such as the buyers, but they will also be trying to catch the market at the lowest point. So demand will still be weak and falling prices will become a self-fulfilling prophecy.
Source: BT

The above may be "old news" to some of you as the report was published some 5 days ago (while we were on vacation).

And in the spirit of the New Year, the wife and I have decided to throw our hats into the ring with our "non-expert" views on what's in store for this year:

We expect 2015 to be an even more challenging year for the private home market (tell me something I don't already know, you may say). Prices and rental yields will remain depressed for a whole host of reasons, chief of which is the deluge of new units that is expected to come onto the market this year. Next comes the various economic and political uncertainties that continue to evolve around the world. And not forgetting the continual weakness of the Sing$ against the greenback, as the United States prepare to raise interest rates.

And speaking of Interest rates, the Sibor rates are expected to continue rising given the weakening Sing$, resulting in higher monthly loan repayments for home buyers/owners this year.

The wife and I were watching the news this evening and it was estimated that for an existing home loan of S$500K with a 20 years tenure remaining, an increase in mortgage rate from 1.5 to 2% will lead to an increase in monthly loan instalment by some S$120. If mortgage rate rises to 3%, the monthly instalment will increase by S$360!

The home-loan rate increase will put additional pressures on new and existing home owners, which may further dampen interests in the new and even resale home markets. Things may get even worse should the Sing$ depreciates more or if the Feds decide to hike its interest rates sooner or more severely than generally expected.

With regard to the property market cooling measures, the Government has indicated that they are unlikely to move on the existing measures in the near to middle term. So no reprieve expected for both buyers and developers anytime soon. Policy wise, we expect the Government to enact new rules to ensure better transparency when comes to developers' sales - so no more hiding behind ABSD and other rebates to try and project a higher-than-actual psf prices.

And on the new projects' front, the wife and I expect developers to continue testing the lower boundary when comes to apartment sizes - all in the name of making apartments more affordable to buyers, quantum-wise. So 3-bedder units of 700sqft or less may become the norm in 2015(?)

Now for the million-dollar question: How much will prices drop in 2015? To borrow a phrase from Ms Chia Siew Chuin, "Barring external shocks and surprises", the wife and I expect private home prices to fall by some 8 - 10% in 2015. This may seem a tad more pessimistic than what the professionals expect, but we believes that the tremors seen in the private home market since August 2014 is just a precursor to bigger problems ahead in 2015.

So what's your view on 2015?

2 comments to ''So what's in store for private home prices in 2015? "

  1. With the wild swings in the stock, currency and the commodities market,
    I am expecting something bigger to happen. A 5 to 8 % correction in the property market seems small as compared to the huge increase in the past 5 years. A 20% drop would be seem as more justifiable.

  2. Hi Dave,

    It will probably take something like the 2008 Global Financial Crisis to cause a 20% drop in private home prices this year. While the wife and I have learned to "never say never", it does look a tad unlikely at this juncture.