Little Cheers for developers
As tighter mortgage controls cools demand in Singapore, Asia’s second-most expensive housing market has seen home prices fall for the ninth quarter, the longest losing streak in 17 years. What does this mean for new launch condo projects and existing condos for sale?
The government has rolled out several rounds of cooling measures since 2013. These measures include systemic and short-term initiatives, for example loan-to-value limits and Additional Buyers’ Stamp Duty.
Developers and other stakeholders have long been calling for these and other state-imposed property-cooling actions to be relaxed in the declining housing market. Minister of National Development Khaw Boon Wan does not agree – he has stated that property-cooling initiatives will remain for now.
Khaw added that the correct time to amend or even remove a few of the short-term measures is when the market balance is much more definite and viable. He says he believes that when the time is right, the government will adjust and perhaps even lift the cooling measures. “I don’t think we are at that point yet,” he said.
According to data from the Urban Redevelopment Authority released in January, an index tracking condos for sale and prices of other private homes fell 0.5 percent in the last quarter of 2015. In a discussion with Today in August 2015, though, Khaw said that although price regulation in some private-market sub-sectors has been intense, and the property market is “a lot less hot,” other segments have some catching up to do.
Shortly before Khaw’s interview, Ravi Menon, managing director of Singapore’s Monetary Authority, said that it was too early to eliminate the cooling initiatives since the price adjustment was too modest, when compared with the 60 percent upsurge in property prices in just three years. Property prices reached their peak in 2013.
Developers of new launch condo projects and their investors are justifiably concerned about the declining prices, especially with the current surplus of government-sponsored housing as the authorities seek to increase affordability and availability. Khaw assured Today that the government has no plans to intentionally trigger a surplus. While a property bubble does not profit anyone but developers, he explained, a market failure hurts everyone, with dreadful effects on the rest of the economy.
Investors with condos for sale should take note that government experts are examining the movements and trends in sub-sectors, and they are also observing statistics of sales and purchases in private- as well as public sector markets. The different moving parts of the housing sector are intertwined, says Khaw: it’s not a simple matter of searching for a figure or an indicator and saying, “aha, we have arrived.”
Khaw indicated that the outside world would also influence Singapore’s property market and economy. He noted that central banks globally have been speaking about standardization of rates of interest for a long time. Interest rates are a key issue affecting not only houses and condos for sale, but also the wider real estate market.