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Govt may review cooling measures by year-end

Posted on 3 Jul 2015 | Comments Off

The authorities are likely to review the existing property curbs later this year to ensure a soft landing in Singapore’s residential market, according to a recent Business Times report citing UOB Research.

In light of the bank’s forecast that home prices could suffer a drop of 5.0 to 10 percent in 2015, the government may reduce the seller’s stamp duty (SSD) and lower some selected tax rates under the additional buyer’s stamp duty (ABSD).

“In our view, it may make sense to tweak some of the stamp duty measures such as the ABSD and SSD as market speculation has fallen significantly,” it said.

Aside from that, home buyers are already barred from borrowing beyond their means due to the Total Debt Servicing Ratio (TDSR) framework and the caps on loan quantum.

However, UOB feels the government will only ease the existing cooling measures once prices have fallen by at least 10 percent.

“The government is unlikely to act in the absence of a larger price decline as the sharp rise in property prices was a key flash point during the last ‘watershed’ general elections,” explained the report.

Looking back, the authorities only responded when Singapore’s residential market was impacted by major external shocks like the Asian Financial Crisis in 1998 and the dotcom bubble that happened thereafter. Home prices here dived by 45 percent and 20 percent respectively during those periods.

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Posted in Cooling Measures

Tagged ABSD, additional buyer’s stamp duty, Cooling measures, Property curbs, seller's stamp duty, Singapore residential market, Singapore Residential Property, SSD, TDSR, Total Debt Servicing Ratio

More empty homes on the horizon

Posted on 3 Jun 2015 | Comments Off

The housing vacancy rate in Singapore may hit a record high of 9.8 percent in 2016 as private home completions rise from 19,900 units in 2015 to 20,900 by the end of next year, according to media reports citing a Barclays report.

Aside from the private home supply glut, the occupancy rate will also be pressured by growing public housing completions over the coming quarters.

Barclays expects public housing completions to increase from 28,000 units in 2014 to 26,000 this year and 20,000 by end-2016.

“As a result, the overall vacancy rate increased to 7.2 percent at the end of Q1 2015. Island-wide private home rents have fallen five percent from their Q3 2013 peak, while suburban rents have fallen six percent from their Q2 2013 peak,” the report said.

History shows that prices tend to drop significantly when the vacancy rate exceeds eight percent.

During the Asian financial crisis between Q2 1996 and Q4 1998, for instance, private home prices plunged 45 percent as the vacancy rate climbed from 6.2 percent to 9.7 percent.

“With an annual private home demand of only 15,000 units – we estimate 55 percent of total annual household formation of 26-27,00 to live in or enable upgrades to private homes – we estimate the vacancy rate could reach 9.8 percent by 2016E,” noted Barclays.