Cooling measures to stay until prices fall to 2008 level

Property prices will have to be affordable and match prices in 2008 before it would be reasonable to relax some of the current cooling measures, said a recent report by HSR Research.

“We believe that the government will continue to utilise the cooling measures as a means to influence the market in future, by relaxing or tightening the cooling measures to ensure the income to price ratio stays within an acceptable range. The range will likely be determined by referencing data from recent years. We postulate that the reference year could be within recent history, such as 2008.”

To match 2008’s level of affordability, prices need to fall by six percent for resale HDB flats and nine percent for resale condominiums.

“Our analysis indicates that the appropriate levels will be reached in Q3 2015 for resale HDB and in Q3 2016 for resale condo, based on current price and income trends. The affordability ratios might match their 2008 level earlier if prices decline at a faster rate and/or income rise at a higher rate.”

The report added demand is expected to rise due to greater affordability if price and income continue on increase: “Higher income coupled with lower prices will mean that a lower proportion of income is needed to service mortgages. This means that residential property will become more affordable to more people, leading to increased demand. This could potentially lead to higher transaction volume and prices.”

The report defines “affordability” as the ratio of average annual household income to the prices of HDB or private non-landed residential, from the perspective of first time Singapore buyers.

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