ANOTHER single-digit fall in public housing resale prices next year would still be manageable and "a very good development", Minister for National Development Khaw Boon Wan said on Monday.
It is a level people can accept and a balance between keeping homes affordable for homebuyers and preserving the asset values of home owners.
Mr Khaw said this to reporters at the handover of the fifth completed block at the new Waterway Woodcress build-to-order (BTO) project. This also marks the Housing & Development Board (HDB) meeting its target of 28,000 new flats for 2014 - a record in recent years.
HDB resale prices as at Q3 2014 have fallen 6.1 per cent year on year. Mr Khaw said he would be worried if prices fell double digits in 2015 - what he termed "drastic corrections" which historically only happened in response to major external shocks such as the Asian financial crisis, the Sars outbreak, or the global financial crisis in the recent decade. HDB resale prices are widely seen as providing the baseline for mass market private home prices.
Lee Nai Jia, associate director of research at DTZ, believes a double-digit decline is unlikely, given that the Ministry of National Development (MND) is cutting its launch of new flats to 16,900 next year, from the 22,400 it launched this year.
The scaling back was because "we can't carry on like this and there is no necessity to carry on like this", said Mr Khaw, referring to the huge supply resulting from the ramp-up in BTO building activity since 2011.
Dr Lee said: "Besides BTO supply, the government also has quite a few tools to moderate the fall in prices on the demand side, such as subsidies, increasing the income ceiling, and relaxing of restrictions on singles buying public housing."
Other analysts also see the reduction of BTO supply as a sign that the government is preparing to slow the decline in HDB resale prices, creating something like a "soft landing".
Mr Khaw also broached the possibility of lifting some of the temporary property cooling measures, which most analysts take to mean buyer's and seller's taxes. "When the temperature becomes warmer, we have to adjust. Question is: when do you do that and how do you do that? So those are obviously issues for consideration next year," he said.
Knight Frank Singapore executive chairman Tan Tiong Cheng said: "As much as I think cooling measures have served their purpose, sometimes you can't just pull the brakes and hope the thing will stop in time. So it's good to look at the intended or unintended effects of the measures, and review whether some of them should be moderated."
But Mr Khaw made it quite clear that the total debt servicing ratio (TDSR) framework, which caps borrowers' total monthly debt repayments at 60 per cent of their gross monthly income, will stay.
The Monetary Authority of Singapore had similarly indicated when it introduced the framework in June 2013 that the TDSR was "structural in nature and meant for the long term". That said, the loan-to-valuation limits for housing loans are not permanent and will be reviewed according to market conditions.
While recognising the TDSR as a healthy rule that encourages prudence, the market has also singled it out as the tool having the most impact on property buying sentiment.
"I think TDSR is not a wrong framework. In fact it's a good framework which now several other central banks are also taking note of and some have already implemented their own versions," Mr Khaw said.
Earlier this month, for instance, Australia's prudential regulator asked banks to limit growth in home loans to investors to 10 per cent a year, and said it will step up overseeing of mortgages amid surging house prices in Sydney and Melbourne.
But DTZ's Dr Lee believes that any review of loan-to-valuation limits in the short term is unlikely, even if interest rates increase next year because, at 72 per cent, Singapore's proportion of housing debt to GDP is still rather high.
Taking stock of his term, Mr Khaw said he had taken a very decisive step to shift the market's balance between buyers and sellers when he joined MND three years ago. "At that time, it was a little bit too predominantly a sellers' market. Now the balance is shifting (to a buyer's market) and we expect it to continue to shift next year. I don't think it has stabilised yet," he said. Greater stability may come next year.
Having cleared the first-timer backlog of demand for new flats, Mr Khaw said his focus in 2015 will be on singles and low-income families who cannot yet afford flats and are renting. The MND will also refine its policies to meet the housing needs of married couples hoping to live with or close to their parents, as well as seniors who want to monetise their large flats.