Home prices and rents continue to fall; analysts predict further declines
Singapore Real Estate Exchange (SRX) reported that prices for resale Housing and Development Board (HDB) and resale non-landed private residences fell 0.8 per cent and 1.1 per cent month-on-month in November, respectively. With the latest decline, HDB resale prices are at their lowest in 40 months, a 9.8 per cent decline from their peak in April 2013. The 9.8 per cent decline is almost twice the five per cent target that National Development Minister Mr Khaw Boon Wan shared during the “Our Singapore Conversation” dialogue on housing in May 2013.
Mr Eugene Lim, Key Executive Officer of ERA Realty, told Channel News Asia, “Continued decline of HDB resale prices is expected” because of loan restrictions, including the 30 per cent mortgage servicing ratio that affects buyers’ ability to purchase higher price quantum flats.
OCBC Investment Research stated in a research report released last week that private residential property prices in Singapore will decrease by ten to 15 per cent over 2015 and 2016, with developer sales forecast to be between 8,000 and 10,000 units in 2015. This is due to a huge oversupply of houses and the US Federal Reserve’s pending interest rate increase.
Macquarie Capital Securities analysts are recommending for Singapore property developers to clear approximately 12,000 homes under the existing inventory of unsold units, and to look into a ten per cent price decrease in 2015. The ten per cent decrease is expected to bring prices back to the average levels witnessed in 2009 to 2012. A subsequent price increase of one per cent from 2016 onwards is suggested by Macquarie to “alleviate margin pressure”.
The rental market are showing signs of moderation due to the rise in availability of rental of private homes exceeding demand, according to the Singapore Real Estate Exchange (SRX) report. Rents of non-landed private residences declined by 0.8 per cent month-on-month and 5.3 per cent year-on-year in November. HDB rents fell by 0.1 per cent month-on-month and 2.2 per cent year-on-year in November.
Mr Chris Koh, Director of Chris International said to TODAY, “The HDB rental market is also facing an oversupply issue because HDB owners who collected their keys to their new condominiums are putting their flats up for rent and there will be more of such cases to come as more private projects get TOP (temporary occupation permit).”
Positive outlook for Singapore property market in 2015
The “Emerging Trends in Real Estate Asia Pacific 2015” report released by the Urban Land Institute and PricewaterhouseCoopers (PwC), sees Singapore excluded from the top 30 markets for property sales volumes recorded this year. Singapore was ranked ninth last year with sales figures of US$4.7 billion (S$6.2 billion) recorded in 2013. Mr Yeow Chee Keong, Real Estate and Hospitality Practice Leader at PwC Singapore told TODAY that foreign markets such as key Australian and Japanese cities have real-estate investment options that are more attractive.
However in terms of investment and development prospects for real estate in 2015, Singapore was ranked ninth globally. Despite the fall of two notches from last year’s ranking of seventh, the Singapore’s foundations for the real estate sector remain bullish and attractive for the upcoming year.
Singapore properties also continue to attract ultra-high net worth individuals (UNHWs). According to Wealth-X and UBS World Ultra Wealth Report 2014, the Republic is ranked seventh among ten countries where UNHWs are setting up their second home. In the report, the statistics of second homes for UNHWs in Singapore is three per cent which is on par with China and Hong Kong.
Reduction in property tax
The Inland Revenue Authority of Singapore (IRAS) announced that the property tax for HDB flat owners will be lowered for a second consecutive year, in 2015. The reduction in property tax will take effect from 1 January 2015 which will result in the owners of three-, four-, five-room flats and executive flats paying S$12 to S$14 less. Similarly, private home owners will pay less property tax from 1 January 2015 due to a reduction in the annual values for 25.7 per cent of private residences (73,300 homes). Due to the current oversupply of homes, the Annual Values (AVs), or estimated annual rent of a property, witnessed a dip leading to IRAS readjusting the property tax.
Revised Resale Price Index for HDB flats
The HDB Resale Price Index (RPI) will be revised to include more attributes to compute price changes in resale flats; it will be implemented this month. Last revised in 2002, the improved RPI will factor in attributes such as age, storey, size and proximity to amenities. Price changes in all of the existing 26 HDB towns will also be taken into account for the index. Currently, several estates including Bishan, Bukit Panjang, Bukit Timah, Punggol, Sembawang and Sengkang are excluded due to low resale transaction volumes.
National Development Minister Mr Khaw Boon Wan mentioned in a blog post, “It is therefore timely to review the RPI methodology to better capture price changes over time, and control for the variations in attributes of the resale flats transacted.”
Three sites announced for sale under Government Land Sales (GLS) Programme
The government is offering a wider selection of private housing with its recent announcement of the second half 2015 Government Land Sales (GLS) Programme. The Urban Redevelopment Authority (URA) reported on 5 December that the three sites – at Jurong West, Woodlands and Holland Village – which can hold about 1,500 homes – will be released for sale. The Jurong West residential site was released for sale on 5 December, while the Executive Condominium site at Woodland Avenue 12 will be put up for sale on 16 December. The two sites are under the confirmed list, whereas the mixed development site at Holland Road was confirmed on 4 December to be launched for sale under the reserve list.