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Impact of latest curbs has Redas seminar abuzz

Sentiment affected, but demand is still there as long as launches are paced out and prices realistic, speakers say

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Property players are still coming to terms with the surprise cooling measures that took effect on July 6, with various views on their impact aired at Real Estate Developers' Association of Singapore's (Redas) property market update seminar for 2018.

Singapore

PROPERTY players are still coming to terms with the surprise cooling measures that took effect on July 6, with various views on their impact aired at Real Estate Developers' Association of Singapore's (Redas) property market update seminar for 2018.

While Redas sees the heftier additional buyer's stamp duty (ABSD) on developers as a "big setback" for the property market here, JLL sees moderate price growth ahead for property prices and demand being able to match supply in the years ahead so long as launches are paced "sensitively".

Redas president Augustine Tan warned on Tuesday that cooling measures that kicked in on July 6 raised the cost of home ownership and cooled demand from investors and foreigners.

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The measures include a non-remissible 5 per cent charge for developers when they buy residential properties for development, higher ABSD for Singaporeans and PRs buying their second home and onwards, and higher remissable ABSD for entities buying residential property.

Mr Tan said buyers' demand for a second residential property and onwards will be further dampened from the measures, exacerbating the high supply situation.

But even first-time homebuyers would face a higher cost of ownership due to tighter loan-to-value (LTV) ratios as they will need more cash or CPF (Central Provident Fund) outlays for their downpayments, he said.

The measures could erode the confidence of developers, investors and buyers, he said.

"Property markets are driven by both economic fundamentals and market sentiment. It is thus imperative to monitor the impact of the new measures as the unintended consequences could have broader ramifications."

He added that Redas shares the government's interest in maintaining a stable and sustainable property market.

JLL Singapore head of research and consultancy Tay Huey Ying, who was also presenting at Redas, argued that an oversupply in the market can be avoided.

By JLL's estimates, there is an unsold supply of 50,526 units, or 12,632 units each year over the next four years.

This will largely match the estimated annual average demand of 10,566 to 12,159 units she forecast. The two sets of figures correspond to last year's developer's sale volume and the average annual new sales demand over the past 10 years, respectively.

She made her forecast on the basis that while cooling measures will shave some demand, expectations of steady growth, rising wealth and a healthy employment market will still support demand.

But developers will have to pace their launches in accordance with market demand within the five-year period before ABSD pentalites are incurred.

She also said there is room for home prices to post moderate growth, as long as steady economic growth continues and there are no shocks like a full-blown trade war.

As for the collective sale market, it is not necessarily game over.

"There is room for collective sale activity, but... the margin that developers can hope to enjoy has been narrowed," she said.

"Developers can be expected to pare down offer prices, so for collective sale potential sellers, there is a need to readjust the pricing expectations if they want to secure a buyer."

Fellow presenter, CIMB private bank economist Song Seng Wun, said that there is still homebuying demand as economic fundamentals are still supportive, generating jobs and income growth, but developers may just have to deal with less profit.

"The only question is pricing," he said. "We may not be flogging off as many properties as we forecast in the beginning of the year, but they're still moving."

He said that given stable macroeconomic conditions and better sentiment on the ground, prices would likely have continued to firm up in the absence of government action.

But there are also downside risks such as interest rate hikes and the possibility of a trade war "starting to materalise" may have prompted policymakers to act.

"The macro landscape allows for market correction now to be stable and orderly," he said. "Whereas if they were not to do anything until the market corrects itself, it could be a recessionary event caused by... events beyond our control."

By acting early now, the government can still have the option to unwind or dial back their measures later on "should downside risks materialise in a meaningful way" to support the market, he added.

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