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Debt servicing rule dents prices, volumes

Q3 private property prices up 0.4% but certain segments show decline: URA flash estimates
Wednesday, October 2, 2013 - 06:00

[SINGAPORE] The Total Debt Servicing Ratio (TDSR) framework has made its presence felt, crimping prices and volumes in pocket segments of the private and public residential markets.

Prices of Singapore's private homes rose a marginal 0.4 per cent in Q3, according to the Urban Redevelopment Authority's (URA) flash estimate, compared with the one per cent gain seen in the previous quarter.

Specifically, prices of non-landed homes in the Core Central Region (CCR) slipped 0.5 per cent in Q3, compared with a 0.2 per cent dip the previous quarter.

In a similar vein, prices of city-fringe homes dropped 1.1 per cent, reversing a 0.2 per cent rise in Q2. This is the first decrease since the first quarter of last year.

"The third quarter's price changes are significant in that two market segments, that is, CCR and Rest of Central Region (RCR) posted price declines simultaneously. As these two segments rely more on investor demand, this group of buyers has been affected more significantly by all the cooling measures in place, including the TDSR curbs," said Ong Teck Hui, national director, research and consultancy, at Jones Lang LaSalle.

But the prices of city-fringe homes might register a larger drop when the finalised index is released, given that the preliminary numbers are based on caveats lodged during the first 10 weeks of the quarter, said Desmond Sim, associate director, CBRE Research.

"CBRE expects that when the transactions from recent new launches such as Thomson Three and Sky Vue have been included, the final Q3 2013 islandwide price index might turn out to be the same level as the Q2 2013 index," he said.

Lowering price expectations in light of the new curbs on housing loans has been one way developers have tried to overcome the slower sales momentum, said Chia Siew Chuin, director of research and advisory at Colliers International.

Some developers have also opened showflats a couple of weeks before sales bookings begin to allow potential homebuyers time to obtain approval for housing loans.

That being said, transaction volumes have dropped across all market segments. According to data provided by Knight Frank Singapore, total volume in the CCR and RCR fell 61 per cent and 72 per cent quarter-on-quarter. In the Outside Central Region (OCR), where mass market homes are located, transaction volumes fell 50 per cent quarter-on-quarter.

While prices in the OCR rose in Q3, the increase of 2.1 per cent was overshadowed by the 3.8 per cent gain seen in Q2.

According to Knight Frank, average prices of new sale private non-landed homes in the OCR was around $1,332 psf in Q3, compared with $1,096 in Q2.

Looking ahead, Mr Ong said that he expects the OCR price increase to continue moderating over the next few quarters, while CCR and RCR prices could show a gradual softening trend.

He noted: "Year-to-date, OCR prices have risen 7.4 per cent while CCR and RCR prices are practically flat. The vulnerability of CCR and RCR is more apparent since over the last seven quarters, CCR had three quarters of price dips while RCR had two."

Said Nicholas Mak, executive director, research and consultancy department at SLP International: "For the whole of 2013, the private residential property price index is projected to increase by 1-3 per cent year-on-year. The price index for CCR and RCR could register a 0 to -2 per cent year-on-year change. For non-landed properties located in the OCR, the price index is likely to increase 7-9 per cent year-on-year," he said.

Indeed, the sustained interest in mass market homes is partially supported by the introduction of another group of buyers, mainly the newly minted Singapore permanent residents who have to wait out three years before they can buy resale HDB flats, said Eugene Lim, key executive officer at ERA Singapore.

This has resulted in those with sufficient funds purchasing suburban homes instead of waiting to buy a resale HDB flat, he said.

That being said, the projected weaker resale prices of HDB flats ahead could affect the affordability of the upgrader's segment of the private residential market, pointed out Ms Chia.

"All things considered and barring any unforeseen shocks, overall private residential home prices are expected to flat line in Q4 and register a mild increase for the whole of 2013," she said.