Saturday, 26 July 2014

Too early to relax property curbs: MAS

Risks remain, it says; modest pick-up in overall economic growth expected
By Yasmine Yahya, The Straits Times, 25 Jul 2014

PROPERTY cooling measures of recent years are helping to rein in housing prices and household debt, but it is too soon to ease restrictions, a top official says.

Monetary Authority of Singapore (MAS) managing director Ravi Menon, speaking at the release of the MAS annual report yesterday, noted that housing prices have moderated but that risk factors are largely unchanged.

"Property prices remain at elevated levels... Prices have gone up 60 per cent in the past four years, and they've declined just 3.3 per cent in the past three quarters," he noted. "Global interest rates are still extremely low, and if you relax property measures in the current, very easy liquidity environment, it might set off another spiral of price increases."

Also, high-debt households are still cleaning up their finances and need time to pay off their loans.

Still, he said, property cooling measures have helped strengthen overall household balance sheets.

First, household debt growth has moderated. In the third quarter of 2011, for example, households took on 13 per cent more debt than they did in the same quarter of 2010. But in the first three months of this year, debt grew just 5.5 per cent.

Second, new housing loan borrowers are better placed to repay loans. Almost all new housing loans granted since the introduction of the total debt servicing ratio - designed to stop borrowers from overextending themselves - were within the 60 per cent limit.

The moderation in property prices, along with a fall in car prices, has seen MAS narrow its forecast range for headline inflation to 1.5 per cent to 2 per cent, from 1.5 per cent to 2.5 per cent before.

This comes amid a somewhat brighter economic outlook, with growth set for a modest pickup in the second half, Mr Menon said.

The economy is on track to grow 2 per cent to 4 per cent this year, with both major engines of world growth, the United States and China, holding up, he said.

Sectors relying on regional demand, including some financial services, business services and chemicals, should do well, he added. And those looking to the home market should stay resilient.

But the likes of electronic production will keep seeing slower growth as economic restructuring forces firms to face a new reality of higher labour costs, he said.

"What is happening now is the 'servicisation' of manufacturing, where production is shifted offshore but control centres continue to be located here."

Looking at the Middle East, Ukraine and Thailand, CIMB economist Song Seng Wun noted that external risks remain.

Even so, Singapore has fared well as a financial centre. Financial and insurance services grew 10.8 per cent last year.

MAS, which manages Singapore's foreign reserves, reversed a $10.6 billion loss to post an overall profit of $15.8 billion for the financial year. Stripping away the effect of currency translation, it made foreign investment gains of $10.6 billion, up slightly from $9.4 billion previously.

More homes snapped up as prices slip in Q2
Buyers lured back as prices continue to fall for public and private housing
By Cheryl Ong, The Straits Times, 26 Jul 2014

BUYERS jumped back into the local housing market as prices of both public and private homes fell for another straight quarter, figures out yesterday showed.

A raft of cooling measures has kept a tight rein on the market, but clear evidence of softer prices is drawing buyers back.

Private property prices slipped by a gentler 1 per cent in the April to June period from levels in the preceding quarter, when they dropped by 1.3 per cent. However, the number of homes sold shot up 46.4 per cent to 4,118 units from the first quarter to the second.

A similar scenario played out in the public housing market: Prices of resale flats fell 1.4 per cent in the three months to June 30 - a slight improvement over the 1.6 per cent drop in the first quarter.

But 4,389 Housing Board (HDB) flats changed hands during the quarter, up 16.1 per cent from the previous quarter.

This was the fourth straight dip in the HDB's resale price index, which has seen a 5.3 per cent decline since the peak in the public market a year ago.

Although buying volumes are rising, analysts say that an increasing supply of completed condo units and public flats will continue to hold prices down.

R'ST Research director Ong Kah Seng said sellers of resale HDB flats can no longer demand high prices as the mortgage servicing ratio, which caps loans for public flats at 30 per cent of a borrower's gross monthly income, limits large home loans.

As more owners take possession of newly completed HDB flats, the number of public homes on the resale market is likely to rise, said SLP International research head Nicholas Mak.

"Buyers of Build-to-Order flats are required to dispose of their existing HDB flats within six months of taking possession," he said. And the supply will only increase as upgraders move into new private homes.

A total of 24,893 new units, including executive condominiums, are estimated to be due for completion by the end of next year, Urban Redevelopment Authority figures showed yesterday.

Prices on the private home front fell across all segments. City-centre prices declined 1.5 per cent, while city-fringe prices fell 0.4 per cent. Prices of suburban homes dropped 0.9 per cent.

Even though developers dangled competitive offers at new launches, the overall slide was led by non-landed resale units, which fell 1.3 per cent, while new condo units saw a 0.5 per cent dip.

Ms Chia Siew-Chuin, director of research and advisory at Colliers International, said: "This could indicate that the stalemate between home owners and buyers has given way to a softer stance among sellers."

Upcoming launches such as Keppel Land's The Highline Residences are expected to underpin sales volumes, which are likely to be around 4,000 to 6,000 for the second half, predicted Dr Tan Tee Khoon, executive director of residential services at Knight Frank. Private home prices could moderate by 5 to 6 per cent by the fourth quarter, he said.

Property curbs may be 'eased faster if prices drop sharply'
Analysts say Govt could act in such a scenario if many owners are unhappy
By Melissa Tan, The Straits Times, 28 Jul 2014

WHILE the Government has said it is not time yet to relax the property market cooling measures, analysts noted that certain developments could prompt policymakers to act faster.

One could be a sharp drop in property prices within a short period, the analysts said during a round-table discussion organised by The Straits Times last week. The other would be a groundswell of unhappiness from a large number of home owners caused by sharply falling prices, the panellists added.

Their comments at the discussion, held at the Singapore Press Holdings office, comes amid a backdrop of a continued slowdown in the public and private housing markets.

On Thursday last week, Monetary Authority of Singapore managing director Ravi Menon said even though prices had eased, it was too soon to lift restrictions.

The softening of prices has recently led developers such as Mr Kwek Leng Beng of City Developments (CDL) and Mr Cheng Wai Keung of Wing Tai to urge policymakers to review some curbs.

Housing Board resale flat prices have slid 5.3 per cent since June last year while private home prices have fallen 3.2 per cent since September, going by official figures out last week.

This was after tough home loan curbs were rolled out in June last year.

Even so, experts said prices would likely have to fall a lot faster for policymakers to ease curbs, given that private home prices have climbed about 60 per cent since the global financial crisis in 2009.

"I think they (policymakers) are looking for something more pronounced, a double-digit kind of price decrease," said Mr Donald Han, managing director of consultancy Chestertons.

"There's more geopolitical risk now... Perhaps next year the Government may want to keep their hands a little bit closer to the button in case they need to unpick certain measures," he added.

However, the experts were also quick to stress that a large price drop alone was likely not going to be enough.

CIMB economist Song Seng Wun said the speed of a drop is also crucial. "It's not just the quantum but the period of time. If there's geopolitical risk that suddenly adds pressure, it could be compressed within a short period of time."

Mr Han agreed: "A 12 per cent drop in six months would be very drastic, but a 12 per cent drop over a two-year period would be quite acceptable. It's a timeline kind of focus for everybody, not just a number."

Even then, they agreed that the psychological threshold could be as much as a plunge of about 20 per cent in home prices.

This is because many people tend to take a loan of up to 80 per cent of their home's value at the time they buy it. A subsequent 20 per cent drop in the home value could trigger banks to ask borrowers to top up their loan in order to keep their home.

Hard data aside, policymakers are likely also keeping an eye on sentiment, experts said.

"There have to be a lot of genuine cases saying, 'I cannot stomach a 10 per cent drop', and that will start to get the whole process of relaxation started sooner than later," Mr Han said.

"But so far, it's been very quiet."

In the meantime, the curbs have helped to stabilise the property market, the experts said.

Mr Li Jun, general manager of Chinese developer Qingjian Realty, said the cooling measures benefit the market by preventing a price bubble.

"The economy is continuing to grow and the Government is stable in terms of its policies, so in the long term, Singapore is still an attractive place for investment," he added.

The fourth panellist was Mr Eric Cheng, who runs real estate agency ECG.

Buying a home? Wait...
Prices can only get more attractive down the road, says panel of experts
By Cheryl Ong, The Straits Times, 28 Jul 2014

INDUSTRY experts have advised potential home buyers to wait if they are thinking about plunging into the property market as prices can only get more attractive.

They told a round-table session organised by The Straits Times last week that while eight rounds of cooling measures and lending curbs have sent private home prices down by 3.2 per cent over the past nine months, more declines are expected.

But buyers who do not want to wait should make offers that factor in this expected fall, ECG Holdings group chief executive Eric Cheng suggested.

He was one of four experts, that also included Chestertons managing director Donald Han, CIMB Bank regional economist Song Seng Wun and Qingjian Realty general manager Li Jun, who gave their take on the state of the residential market in a discussion moderated by Straits Times money editor Lee Su Shyan.

"Today, if I were to buy, I'll offer a price which is projected six months later - which could be 10 per cent from the asking price," said Mr Cheng. He pointed to the global financial crisis in 2008, during which the market swung up sharply after bottoming for eight months. "This time, it's taking us more than eight months, so I would take a wait-and-see approach. The signs are pretty clear - prices will come down and have to come down."

But buyers hoping for a steep fall in home prices may be disappointed, as the panellists noted that home owners have likely enjoyed one or even two sharp price rises over recent years so they are sitting on healthy capital gains and can afford to sit tight.

Home prices are also buttressed by a stable economy, with close to full employment, said Mr Song. While a crash is unlikely, the expectations of falling values have led some owners to lower their asking prices.

The numbers seem to bear this out. While the number of units resold islandwide climbed 7.9 per cent from May to hit 452 last month, prices slipped 1.4 per cent to an 18-month low, according to flash estimates from the Singapore Real Estate Exchange.

But Mr Cheng said this does not necessarily mean sellers are getting the short end of the stick as their next buy is also likely to be at lower prices, contributing to an overall decline in prices.

Though some have pointed out that private homes prices are still out of reach, Mr Han said buyers can always turn to Build-To-Order (BTO) flats or even executive condominiums (ECs). "These days, the queue for BTO flats is shorter, and there are a lot of EC projects where you can still get grants. You don't have to get into the private market," he said.

But as Mr Li put it, Singapore is still a good place to invest because of the appreciation in property values.

"If anybody finds a good location, if the price is right, and the yield can pay for your monthly instalments, it's a matter of choice of whether he wants to own it or not," he said.

Larger flats bear brunt of slow resale market
Fewer units sold, and it is taking longer to find buyers despite falling prices
By Janice Heng, The Sunday Times, 3 Aug 2014

Sales of five-room and executive flats have been the worst hit by the shrinking Housing Board resale market.

Not only are fewer of these large flats being sold, but they are also taking more than twice as long to find buyers, compared with five years ago.

This is despite prices falling since the start of last year. The median cost of a five-room flat in Sengkang, for example, was $495,500 in the second quarter of this year, down from $523,000 at the start of last year.

An executive flat in Woodlands now fetches $600,000, down from $629,000 before.

According to property experts and agents, the declining interest is due to recent home loan curbs turning more buyers away from these more expensive units. Some sellers also remain reluctant to accept lower prices.

Since peaking at 34.4 per cent in 2009, the resale market share of five-room and executive flats has fallen to 27 per cent in the second quarter of this year, according to the latest HDB figures.

Data from property firms also showed that it was getting harder to find a buyer.

ERA Realty said it took an average of 31 days in 2011 to sell a five-roomer or an executive unit. Now, it takes around 47 days.

Figures from PropNex Realty also showed that such flats took one to two months to sell in 2009. This lengthened to two to three months last year. This has now stretched to between three and five months.

The mortgage servicing ratio limit, which caps the share of monthly income that can be used for housing loans, was lowered from 35 per cent to 30 per cent last August.

"This limits the size of the loan a buyer can get. So they now tend to avoid higher-priced flats," said ERA Realty key executive officer Eugene Lim.

The new total debt servicing ratio, introduced last June, has also made it harder for buyers to get a maximum loan of 80 per cent.

That means buyers who are keen may be unable to get the necessary financing, said SLP International Property Consultants head of research Nicholas Mak.

One seller of an executive flat in Ang Mo Kio, who declined to be named, has faced just this issue. "There are interested viewers, it's just that some of them cannot get the loans," he said.

And because executive units are rare, sellers seem to be less willing to compromise on price in order to close a deal, said Mr Lim.

The HDB stopped building new executive flats in the early 2000s.

Five-room flats make up about a quarter of existing HDB flats, but executive flats account for just 7.5 per cent.

Added PropNex Realty chief executive officer Mohamed Ismail Gafoor: "The increase in supply of Build-To-Order flats has also swung buyers over from the resale market."

BTO supply was ramped up from 2011 till 2013, with more than 25,000 new flats launched each year.

All of this has made it harder for sellers, who have had to accept lower prices or shelve their downgrading plans.

One seller who had to face the new market reality was 43-year-old Janice Tan, who put her five-room Jurong West flat on the market in March.

A deal was closed last month - but only after she and her husband lowered their price for the unit, which had previously been valued at $500,000.

"We actually went much lower, by about 8 per cent," said the human resources executive. Given the current market, they believe they had little choice, she added.

And that is precisely what property experts have been urging: for sellers to be more realistic in their expectations.

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