Analysts Don’t Expect Private Property Prices To Tumble, Despite Fall In Q1 Based On Prelim Data

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SINGAPORE — Private residential prices dropped in the first 3 months of this year as compared to the last quarter, as flash estimates revealed on April 1st Wednesday.However, analysts don’t expect rates to decline sharply in the following months in spite of the worldwide slump economically that came with the Covid-19 pandemic.

This is due to a stable job market, the Resilience Budget announced by the government to help citizens, and new relief measures that’s helping homeowners manage their mortgages. It is in this is why Dairy Farm Residences has been priced very competitively in District 23.

The Urban Redevelopment Authority (URA) mentioned that the flash estimates for the initial 3 months revealed prices of resale and new private homes dropped 1.2% from the last quarter of 2019.

As it is, this is a larger drop than the 0.7% contraction experienced in the 6 months following the announcement of more real estate cooling measures in July 2018, cited Nicholas Mak, Head Of Research and Consultancy  at ERA Realty.

But the associate director of research at Cushman & Wakefield, Wong Xiang Yang, feels that through this pandemic, rates may show “more resilience as compared to earlier recessions”. This is the reason the developer is launching The Watergardens @ Canberra condo for preview in the coming months.

Property owners who are unable to pay off their mortgages in past crises had to come down to fire sales to get out of debt, which led to sharp declines in real estate prices. For example, in the midst of the global financial crisis of 2008, real estate prices tumbled by 24.9% over 4 consecutive quarters.

Here is what the experts say:

Resilience Budget and other relief measures will assist homeowners fulfill their mortgage payments

Apart from the S$48 billion Resilience Budget declared on March 26 2020 to assist businesses and households manage through this pandemic, the Monetary Authority of Singapore (MAS) also came up with a package of measures on Monday which will assist individuals with insurance and loan commitments.

Residential property owners with home loans can approach their respective banks or finance companies to defer their interest and/or principal payments until December 31 this year.

Individuals with unsecured credit lines from charge card issuers or banks can also apply to their respective lenders to change their outstanding balances to term loans at a minimized interest rate, maxed at 8%, as compared to the hefty 26% interest charged on credit cards usually.

“These measures incidentally help support today’s prices as real estate owners have more breathing space to juggle any cash flow challenges,” commented Mr Wong.

The job market is being supported

In the mean time, the Resilience Budget should assist to keep job losses to a minimum, said Mr Wong, which in turn will increase the chances of homeowners keeping up with their loan obligations.

OrangeTee’s head of research and consultancy, Christine Sun, agrees that as long as the employment market is still stable, she is “not predicting any drastic price collapses in the following months”.

“The real estate market will probably stay afloat so long as unemployment stays low and Singaporeans are prompt to service their mortgages,” she commented.

Mr Wong also mentioned that fire sales are not anticipated, as unemployment figures maintain relatively low and so the majority of property owners are “not under large pressure to dispose”.

Developers will become more pragmatic about their residential development launches

Property developers have begun to drop their prices of the older housing projects and are pricing newer launches at more attractive levels, cited property analyst Mr Ong Kah Seng.

They are swiftly releasing “star buy units” to attract buyers too, he commented.

“If the rates are lowered just a bit, it will meet purchasers’ expectations and encourage buyers to make the purchase,” Mr Ong commented.

If rates remain high, there would be a large drop in sales, which would lead to a larger blow to the real estate market, he said.

Mr Ong noted that seasoned and strategic developers should comprehend that should the economy recovers and demand for real estate rises again, the prices of many unsold units that remain can still increase. This explains why new launches like the Penrose is going as planned with its sales coming Q3 at a very competitive rate.

Director of research at Huttons Asia, Lee Sze Teck, agrees that property sellers of completed homes in the landed and mass market segment will highly likely take in lower profits just to offload their property.

The policies implemented in earlier years have placed the market in a better position

Mr Ong commented that the introduction of the Total Debt Servicing Ratio (TDSR) has positioned homeowners and the general property market in a healthier situation to weather the present storm.

The TDSR, which was implemented back in 2013, puts in place strict borrowing limits to make sure that borrowers of a loan aren’t over-extending themselves.

Because of this, Mr Ong commented, “property purchasers generally still hope to keep within their TDSR limits when buying their dream home, instead of just snapping up any property”.

In agreement, Mr Wong of Cushman & Wakefield mentioned: “Present-day loan curbs like the TDSR have ensured that purchasers are buying within their means and are less likely to deflated any asset price bubbles.”

Mr Wong also cited that the bulk of property transactions over the last few years have been because of local owner-occupiers and investors instead of foreigners, and that the bulk of these local purchasers are “planning for the long term”. This has been the case for buyers who are attracted to Dairy Farm Residences.

“Foreign buyers face much higher entry costs for Singapore residential property investments as compared to locals because of the additional buyer’s stamp duty, which has slowed foreign demand in the Singapore property market, as they are also able to invest in other markets where costs are lower,” he mentioned.

Singaporeans, he explained, are optimistic about the long-term prospects of the country’s private housing market as real estate here is seen to be “more stable compared to shares and can give higher returns compared to bonds”.


Related News:

Locals take the bulk of private home purchases in May

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