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
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?
With the wild swings in the stock, currency and the commodities market,
ReplyDeleteI 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.
Hi Dave,
ReplyDeleteIt 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.