Property market’s “over-exuberance” warrants discretion

Bidding for land plots have been fervent and this has inherently led to increases in property prices and sales volume.

The Monetary Authority of Singapore (MAS) has warned against over-estimating the pace of recovery.

Amoy Street 15. Picture: iProperty

Buyers, developers and banks all advised to be wary of over-exuberant market

MAS director Ravi Menon has said in a recent briefing that developers, buyers and banks should all exercise caution when making land bids, property purchases and managing home loans.

For developers, his advice is to be more cautious when making land bids. Previous months have seen some developers or consortium of developers paying high prices for massive land plots. Higher land bids will also mean higher selling prices and when new projects are launched on these sites, a considerable number of units will flood the market, possibly tipping the supply and demand scale.

And in turn, property buyers will do well to be aware of this future hike in supply, which could then depress prices. Interest rates are also on the rise, thus making a commitment to a property or more properties would warrant careful long-term financial planning.

To the banks, MAS’ advice is to exercise care when underwriting loans, also in lieu of how property buyers who over-commit might have trouble handling their mortgages in future when interest rates are high, rental prices low and sale opportunities low.

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Supply of new homes expected to double in near future

Grandeur 8. Picture: iProperty

The main concern raised by Mr. Menon is about the pace of recovery. Should the property prices surge ahead of income growth, the growth would not then be a sustainable one. It runs the risk of destablising market correction in a few years’ time when the new supply enters the market.

This second quarter, private property prices have increased by 9.1% in comparison to Q2 last year. The number of homes sold in the past 12 months were also 25% higher in a year-on-year comparison.

New housing loans have increased 34%, a possible sign that more buyers are making the effort to close deals this year than last.

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