Tougher times ahead for housing market

Analysts expect Singapore’s private housing market to face tougher times next year, with the lacklustre economic environment dampening sentiment further, reported TODAYonline.

The US Federal Reserve’s decision to raise interest rates and the existing property curbs could see prices drop by up to eight percent in the next 12 months.

JLL’s National Director for Research and Consultancy Ong Teck Hui, said: “Higher interest rates coupled with cooling measures will dampen demand, perpetuate sluggish market conditions and softening in prices … In 2016, it is expected to fall by at least the same pace or faster if economic conditions worsen.”

The five to eight percent price moderation forecasted by analysts for 2016 is faster than the expected drop this year. Data from the Urban Redevelopment Authority (URA) shows that private home prices dropped 3.2 percent during the first nine months of 2015, and is expected to end the year at around five percent lower than 2014’s level, noted analysts.

Some property developers may also come under pressure to clear inventory next year as their respective deadlines to avoid paying extension fees and stamp duties near. To move units, analysts believe that these developers may be forced to slash prices, potentially improving next year’s sales volume.

Notably, an Additional Buyer’s Stamp Duty (ABSD) of 15 percent will be imposed on developers, unless they build, complete and sell all the units in their project within five years from the date of land acquisition.

Developers with foreign holdings and not building on land sold by the government are also subject to Qualifying Certificate conditions that require them to complete construction in five years and sell all the units in two years.

“There could potentially be more transaction activity in 2016 … (But) this could be at the expense of prices. We anticipate sales only being achieved for the motivated sellers who are prepared to be realistic on price,” said Colliers International, without providing a sales projection for 2016.

Other analysts expect developers to sell between 7,000 and 8,000 units in 2016, which appears to be an increase from 2015’s sales, but still a far cry from 2012’s 22,000 transactions.

Pending this year’s final URA statistics, which is due in January 2016, developers have sold about 5,800 units during the first nine months of 2015. With this, analysts expect sales to reach around 7,000 units this year.

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