The Urban Redevelopment Authority or URA has released flash estimates according to which a decrease of 0.8 percent in the prices of private residential properties has taken place in the fourth quarter of 2013, compared to an increase of 0.4 percent in the same quarter of 2012. In fact, the decrease in the fourth quarter is the first time that the prices declined in two years time. Apart from the flash estimates released on Thursday which indicate falling property prices, resale flat prices for Housing and Development Board or HDB also continues to decline for the second consecutive quarter in the same quarter according to other data. This is possibly because of several measures aimed at easing the rising property prices.
Falling Property Prices in Singapore
However, the fall in prices has not been uniform across all regions, and has in fact risen by 0.8 percent in city fringes. This compares with a decrease of 0.9 percent previously, and property analysts have attributed it to the loan curbs taking effect on the downward pressure. Moreover, there has been an overall increase of 1.2 percent in the prices while it had fallen by 2.8 percent in the previous year. However, prices have fallen by 2.2 percent for the non-landed private residential properties in the city area. When compared to the decline experienced in the previous quarter at around 0.3 percent, this fall in prices turns out to be significantly larger. Moreover, the prices in the suburban areas fell by 0.6 percent in the last quarter of 2013, which has not happened since the second quarter of 2009. In fact, the figure was 2.2 percent in the positive in the previous quarter.
Riverbank property prices stable despite falling property prices
Chris Koh, director of Chris International has attributed the falling property prices to the twin effect of cooling down of the demands and a steady launch of units by the developers. According to him, the introduction of the Total Debt Servicing Ratio of 60 percent has dealt a blow to the designs of numerous homeowners planning to acquire a second home. They had devised the plan where they take a loan to buy a second home and then repay the installments with the rentals they receive from letting out those homes. However, the new debt resulted in most of these people not getting a loan, which caused a slump in the net demand. Moreover, the developers have not ceased launching new units, which made downward adjustment of property prices inevitable.
Good response seen in Riverbank
There are other explanations offered for the fall in prices in the suburban regions. According to Eugene Lim, key executive officer of ERA Realty Network, the current loan policy is likely to hit the mass market customers more than the high-end ones. Moreover, the prices in the suburbs had been on the rise for quite some time and were more likely to be trending on their peak value. Thus, the prices could have moved in only a downward direction from their peak value when the demands slowed down, and the developers had to make it more reasonable to move their units. In fact, the entire Core Central Region will experience falling prices and the prices moderate between five to ten percent for the whole market, according to Mr. Lim.
The prices were on the downside for the HDB resale market as well, with Mr. Lim predicting the prices to continue on their downward slope for the entire year to come. Moreover, the transaction volume for the year is going to be historically low with as few as 20,000 transactions in total. Thus, the prices need to be reasonable for both brand new units, as well as, resale flats in the prevalent market condition where it has become more difficult to secure a loan. To be more precise, the prices for the HDB resale market fell by 1.3 percent in the last quarter of 2013, which is more than the 0.9 percent decrease in the penultimate quarter. The prices have fallen for the second consecutive quarter and the trend is likely to continue for the first two quarters of next year.
However, the prices for HDB resale market are likely to rise because of the fall in the supply of Build-To-Order flats. The buyers are likely to make a comparison between the resale and BTO flats and find that the resale ones do not require any premium just like the BTO ones, according to Mr. Koh. Moreover, the resale flats do not require the buyers to wait for as long as three years, and provide several amenities such as those available in a mature estate and probably resale-housing grant. Thus, large numbers of buyers are likely to move into the resale market in 2014.
The reponse for Riverbank will be excellent as the price which the developer bid for the land is very low and this will attract many buyers who are price cautious.