The property market may seem to be on the uptick, but analysts are cautious about their estimations of the market conditions for the months ahead in lieu of rising housing supply, economic uncertainty and a softening labour market.
Rising housing supply could mean higher loan risks
The Monetary Authority of Singapore (MAS) has issued a warning last week pointing to the potential rise in housing supply as the inventory of unsold stock rises once more. The 4,377 unsold homes from newly-launched private property developments (excluding executive condominiums or ECs) last quarter have since doubled from the 2,172 units in Q3 of 2018.
The number of unsold homes is only likely to rise in the medium term and in turn, property prices could suffer downward pressures.
For home buyers and investors, this could mean higher mortgage rates in relation to incomes which may remain stagnant. If the demand for homes does not rise correspondingly to the rising supply, buyers with multiple investment properties may find themselves not being able to finance their repayments.
In particular, with the current global economic uncertainties and a softening labour market here, rental yields may be insufficient or may be lacking altogether, which could impact buyers who may have overstretched themselves financially.
Cooling measures from July 2018 may have moderated property prices
Overall, property transaction volumes have dropped and developers are now more careful with bidding for land in comparison to the activity from last year. Since the last round of cooling measures which were implemented in July last year, property prices have moderated and are now more in line with economic fundamentals.
Over the last 2 quarters, there were some good responses to some launches, though analysts say this is mainly due to the specific features of these projects such as good locations. Other launches saw more moderate sales in their initial launches.
Private home prices have since risen 2.1% in Q3, though still lower than the 9.1% increase before the roll-out of last July’s property curbs. Transaction volume has fallen 32% in comparison with the 12 months prior to last July, however, overall sales of private homes have risen in the last 2 quarters. New housing loans have also risen correspondingly.