Tag Archives: ABSD

Home prices at record high, seen peaking

Posted on 20 Jul 2012 | Comments Off on Home prices at record high, seen peaking

Private home prices in Singapore have been on an uptrend post-global financial crisis, with the market having risen about 55 per cent since the middle of 2009 to hit a new high. Excess liquidity in Asian markets, a lacklustre United States economy and weakening European markets – as well as local factors such as low mortgage rates, higher immigration numbers, rising affluence and decreasing household sizes – have been driving demand for private residential properties in Singapore.

However, against a backdrop of increasing economic turmoil in the euro zone, slowing growth of Asian economies and increasing Government intervention, it appears that property prices here are beginning to peak.

Moderate rebound in Q2 2012

The Urban Redevelopment Authority’s (URA) flash estimate earlier this month of the private residential property price index for Q2 2012 reveals a moderate rebound from the previous quarter, where property prices dipped for the first time since Q2 2009.

The 0.4-per-cent increase from 206.0 in the previous quarter reflected a stabilising of the market. Prices were generally flatter for the third quarter running, recording no more than a 1.1 per cent difference in index points on a quarter-to-quarter basis. Comparatively, the price index was increasing at a sharper rate of about 2 to 10 per cent across all sub-markets before Q4 2010. Nonetheless, property prices have continued to scale new heights – touching a high of 206.8 index points.

In the individual sub-markets, the price index for the Core Central Region (CCR) recovered by 0.6 per cent following a dip of 0.6 per cent in the previous quarter. The price index for the Outside Central Region (OCR), which reflects the suburban mass market segment, increased at a slower pace of 0.4 per cent, compared to 1.1 per cent in the previous quarter, while the prices for the Rest of Central Region (RCR) remained unchanged. This indicates a rather flat trend across all the sub-markets.

Interestingly, the increase in the price index of the CCR sub-market narrowly outpaced that of the OCR in Q2 2012 – for the first time since Q4 2010. The OCR sub-market however remained robust and surpassed the RCR price index for the fifth consecutive quarter.

Mass market drives demand

The resilient OCR sub-market could probably be attributed to the implementation of the Additional Buyer’s Stamp Duties (ABSD) in December. Since its implementation, a sharp reduction in foreign demand for residential properties was observed, particularly that for investment-grade homes in the CCR and to a lesser extent the RCR sub-market.

URA data showed that the number of foreigners and companies that purchased uncompleted private residential units have decreased by about 34.7 per cent since Q4 2011. Moreover, cautious investor sentiment, as a consequence of global economic uncertainties, has dampened demand for such properties. The suburban mass market segment, which caters to the local population, remained largely unaffected. There was also a possibility that foreign demand spilled over to the more affordable OCR sub-market.

In Q1 2012, developers launched a large number of properties to meet this growing demand – a record 6,903 units, compared to 4,105 from the previous quarter. Of these, 6,526 properties were sold, with 80 per cent located within the OCR sub-market.

Prices likely to stay flat

The mid- to long-term outlook for global economies is generally optimistic. The International Monetary Fund forecasts the euro zone economies to recover by next year on the back of increased fiscal stability. Asian markets are anticipated to rebound due to the expansion of developing and emerging economies and the massive rebuilding of disaster-affected areas in Thailand, Japan and New Zealand.

In light of the positive international outlook, investor sentiment is likely to become less cautious and the demand for investment-grade residential properties here is likely to increase.

Population growth in Singapore is anticipated to slow with tougher immigration regulations and decreasing fertility rate. This will result in reduced demand for mass market properties in the mid to long term.

Moreover, a steady supply of residential properties in Singapore is expected in the near to mid-term. Major project launches expected in H2 2012 include Parc Olympia, Riversails and projects in Jalan Lempeng.

On the whole, we expect residential property prices in Singapore to remain largely flat with marginal and gradual growth, barring more Government intervention. The record supply in the pipeline could help alleviate any pent-up demand in the OCR sub-market, thereby preventing spikes in property prices. In the mid to long term, strengthening global economies would also boost investor sentiment, leading to a gradual recovery of CCR and RCR prices.

The authorities have said they will continue to monitor the residential market closely to ensure stability and sustainable growth. As such, based on the URA flash estimates for Q2 2012, we do not expect the imposition of more cooling measures yet.

By Alaric Yeo and Elaine Chow – analysts at HSR Research & Consultancy

Source : Today – 20 Jul 2012

 

 

 

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Housing market needs more certainty

Posted on 19 Jul 2012 | Comments Off on Housing market needs more certainty

National Development Minister Khaw Boon Wan’s comments in Parliament on the state of the property market illustrate the conundrum of viewing a glass of water as being half full or half empty.

Noting that residential property prices have moderated in recent months, he said the various measures to cool the market “have helped buyers, including those at the middle and low end of the market”.

Growth in mass market private housing prices outside of the central region slowed to 0.4 per cent in the second quarter of the year, compared with 1.1 per cent in the previous quarter, while overall private home prices moved up just 0.3 per cent in the first six months of the year, compared with 6 per cent a year ago.

And there is a warning more measures might be introduced if the situation requires.

“These are positive signs that the market is moving towards a stable and more sustainable path. We continue to monitor the market closely, and remain ready to revise and enhance the policy, if and when the situation demands it,” Mr Khaw said.

What exactly is the ministry monitoring, and what are its targets or goals?

It is also good to see that short-term property speculation has fallen sharply, as indicated by the relatively low volume of sub-sales. But the fact remains that home prices have not come down – they are still at historical highs.

Perhaps the ministry should be clearer about its goals and targets. What exactly is “a stable and more sustainable path”, in its view?

Foreign Buyers

Yes, the proportion of foreign purchases of residential property has come down – from 20 per cent last year to 7 per cent for the first six months of the year.

This is perhaps because of the introduction in December last year of the Additional Buyer’s Stamp Duty (ABSD).

Foreigners (albeit those from America, Switzerland, Liechtenstein, Norway and Iceland are exempt because of certain trade agreements) here have to pay an ABSD of 10 per cent when they buy a home here.

But what is the proportion of purchases by foreigners that Singapore would be comfortable with? I am sure we do not want to eliminate foreign sales altogether.

Also, what about the proportion of sales to permanent residents, who have been said to be one of the main causes of the steep jump in prices in sub-sales of housing board flats?

Spell Out Thresholds

As I have argued before in a previous column, there must be a fairer and more transparent way of introducing measures to cool the property market.

It is not fair for the Government to sell land one day and introduce cooling measures the next, as it has done previously. Buyers and sellers should not have to suffer huge losses by being caught unaware.

Property development takes time. It is often a five- to six-year proposition between buying the land, developing it and finally selling it. In the meantime, loans and other finances have to be managed.

Forecasts are made under prevailing conditions and with current factors in mind. Developers may feel shortchanged if the Government one day puts up a piece of land for sale and soon after introduces measures that are negative to developers.

Residential property buyers and investors would feel likewise, if they purchased a property on current assumptions and conditions, and find the Government introducing measures to dampen the market the next day.

Buying a property is a considerable investment; for most people it makes up a big chunk of their assets and life savings.

Property, in a society where a very large proportion own their own homes, impacts almost everybody. There is therefore a need for greater clarity in our housing policies. The Government should spell out the benchmarks or price thresholds that would entail a response in action from the ministry.

Also, if the Government believes in market forces, the “reserve price” in Government Land Sales should be abolished. You cannot say that market forces should prevail and at the same time artificially prop up land prices with the reserve price. The national coffers might suffer a bit, but it might perhaps help make housing more affordable.

There must be more certainty in the property market. There should be less – or no – speculation on when and what measures the Government would introduce to curb or cool the market.

By Conrad Raj – Today‘s editor-at-large.

Source : Today – 19 Jul 2012

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