An opportune time to ease cooling measures

With the residential market stabilising, analysts believe that this could be an opportune time to tweak the property cooling measures.

Private resale home prices have fallen by around eight percent, while HDB resale prices have dropped by about 10 percent from their 2013 highs, reported Channel NewsAsia.

In fact, one analyst feels that a slowing economy could offer the best environment to ease some of the curbs without fear of market spikes.

“If the Government’s main concern or restrictions against removing or lessening some of the cooling measures are fears that once the measures are reduced, prices will again rebound and grow quite rapidly, then perhaps the best environment for the Government to ease off on some of the cooling measures is when the economy is in the slow state of growth or even maybe in a recession,” noted Nicholas Mak, Executive Director of Research and Consultancy at SLP International.

“In such a situation, housing demand will naturally be weaker if the Government were to remove any of the cooling measures in such an environment, then the chances of prices growing strongly are minimised,” he added.

Although potential home buyers are concerned about the normalisation of interest rates, one observer believes that the market has already factored this in.

“The only kind of risk is maybe interest rates increasing in the coming year. However the market would have already factored that in, because loan approvals are based on a 3.5 percent interest rate calculation, whereas current housing rates are at two percent, or if even there was any increase, it would possibly be quite less than 2.5 percent in total,” said ERA Realty Key Executive Officer Eugene Lim.

“So you’d still be paying less than what your approval was based on. There’s still quite some buffer. There is no danger of people being priced out of the market because of interest rate increase.”

Looking ahead, another consultant expects 2016 to pick up where the market has left off this year, with transaction volumes continuing to improve as “50-50” buyers could come back into the market.

“In 2016, we’ll see buyers starting to come back into the market because in the new sale market, prices will remain pretty firm. And it has been remaining pretty firm for areas like the RCR (Rest of Central Region) and OCR (Outside Central Region), the mid-tier and mass market for new sales, because land costs have not really fallen that much. In fact it’s gone up for some recent tenders,” said Alan Cheong, Research Head at Savills.

“It’s only in the resale market that transaction volumes may start to pick up (as) the number of buyers who’ve been sitting on the sidelines start to see value emerge in the resale market.”

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