Home prices unlikely to “collapse” as possible election looms

As Singapore looks to celebrate its 50th year of independence and with the end of 2015 or early 2016 shaping up as a potential election period, property prices are unlikely to crash, revealed a Credit Suisse report.

Instead, the government will look to keep home prices stable, especially in a rising and volatile interest rate environment, the report said.

Previously, the government managed affordability by implementing a series of cooling measures such as the Total Debt Servicing Ratio (TDSR) framework and Additional Buyer’s Stamp Duty (ABSD) to dampen speculative buying and curb excessive investment by foreign purchasers.

While many Singaporeans are hoping for property prices to drop further, Credit Suisse feels it is not in their interest to see prices fall significantly given the 90 percent homeownership rate and the fact that around 47 percent of household assets are tied up in property.

“We believe that the government is perhaps more unlikely to “compromise” the wealth of its population, ahead of an election as sentiment and confidence in the government is a key factor in any election. We also highlight that in Singapore, the largest land owner would be the government. Therefore, any meaningful correction driven by an oversupply may have a negative impact on the people’s perception of the government,” noted the report.

The financial services firm expects overall prices of private properties to stay flat. Within the prime market, a downside of 5.0 to 10 percent may occur due to vacancy risks from weak rental demand and unsold units, especially for larger units.

But prices will likely trend sideways for the more resilient mass market homes. Specifically, pricing levels of projects with good attributes like proximity to an MRT station could potentially rise 5.0 to 10 percent this year, while less attractive properties could face poor demand and vacancy risks.

The report also stated that many public housing projects are completing this year which could deter some demand from the mass market, posing risks to prices in this segment.

Private home prices across Singapore declined by 4.0 percent in 2014 compared to an increase of 1.1 percent in the previous year, according to data published last Friday by the Urban Redevelopment Authority (URA).

This was the first year of overall price decline since 2008 for the private residential market.

 

Romesh Navaratnarajah, Singapore Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg

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