Week in Review – 15 January 2014

Declines in HDB resale and private residential prices in December 2014, Rise in Singapore interest rate to affect property prices, Upgrading programmes for nine private estates and in Bedok area
Declines in HDB resale and private residential prices in December 2014
Prices of HDB resale flats fell by 0.4 per cent month-on-month in December, reaching the lowest point since August 2011, according to the Singapore Real Estate Exchange (SRX) property report. The decline was driven by mature estates, where resale prices fell 0.9 per cent. Resale prices for four- and five-room flats decline by 0.7 per cent and 0.3 per cent respectively.
The decline was more pronounced for non-mature estates, where four- and five-room flats declined 0.9 per cent, 0.7 per cent and 0.3 per cent respectively. Three-room flats remained unchanged while executive flats increased 1.9 per cent. Overall, HDB resale prices saw a 6.1 per cent year-on-year drop compared to December 2013.
Resale volume went up 28 per cent year-on-year in 2014 based on the SRX data. Mr Nicholas Mak, Head of Research and Consultancy at SLP International, told Channel NewsAsia it is crucial “to look at the general trend, over these two years or three years, and we can see that for the whole of 2014, property prices and volumes have actually been contracting.” Property analysts expect prices to continue falling between 4.5 to 9 per cent in 2015.
HDB flats and private homes saw a 0.4 per cent and 0.8 per cent month-on-month decline in rents in December respectively, according to SRX Property. Rents for HDB flats fell 2.1 per cent, year-on-year. Rental volume for HDB flats increased by 2.3 per cent on a year-on-year basis, but had a 4 per cent month-on-month fall in December 2014.
According to SRX, the overall median Transaction Over X-Value (TOX) crossed into negative territory last month, registering negative $10,000 in December 2014, compared to $0 in November. Districts 25 (Kranji, Woodgrove) and 15 (Katong, Joo Chiat, Amber Rd) had the highest median TOX at $25,000 and $24,000 respectively. Whereas district 10 (Bukit Timah, Holland, Tanglin), 23 (Bukit Panjang, Choa Chu Kang) and 5 (Pasir Panjang, Clementi) were at the bottom, with a median TOX of -$80,000, – $41,000 and -$32,000 respectively.
A report by Colliers International revealed that sales of luxury properties, worth above $5 million, amounted to $546.55 million in the fourth quarter of 2013, higher than the previous three quarters.
The figure was boosted by two significant purchases of luxury residential flats by The Blackstone Group, an American private investment banking firm. Colliers stated that “The conclusion of the two sales manifested the setting in of seller’s fatigue amid the prolonged down cycle in the luxury residential segment, where the price gap between buyers and sellers is narrowing, as the latter are increasingly more willing to negotiate.”
Mr Getty Goh, Director of Ascendant Assets, told investors during a business outlook forum that private home prices are expected to “go down in the next couple of quarters, and it could continue to go down for the next one to two years, or at least it will stagnate and will not go up.” 
Rise in Singapore interest rate to affect property prices
The three-month Singapore interbank offered rate (Sibor) has increased by 18 basis points to 0.6392 percent this year, its highest since April 2010. According to Bloomberg, citing United Overseas Bank and Maybank Kim Eng Research, short-term interest rates may head toward one percent this year as a resurgent US economy could spur the US Federal Reserve to raise borrowing costs.
Vishnu Varathan, an economist at Mizuho Bank, told to Bloomberg, “Home prices may fall a further 10 percent by mid-2016, while short-term interest rates could top one percent this year, more than double the level in 2014.”
Although a rise in Sibor would cause property prices to fall, property analysts say that a significant short-term jump in Sibor would be needed to affect Singapore borrowers. Wee Siang Ng, Head of Research at Maybank Kim Eng Research expects “three-month SIBOR to increase to one percent by the end of this year and two percent by the end of 2016.” 
According to Mr Wee, “that would still be below the stress-tested levels of 3.5 percent that the MAS requires Singapore banks to use in their calculation of debt-servicing ratios to approve loans.”
Upgrading programmes for nine private estates and in Bedok area
Mr Lee Yi Shyan, Senior Minister of State for National Development and Trade and Industry, stated that the public can expect more housing development in Bedok when the Bedok Integrated Complex is completed in 2017. The upcoming complex will house a community club, sports centre, polyclinic, eldercare centre and a library, all under one roof. Bedok is among the second batch of estates to undergo upgrading plans that are a part of an initiative launched in 2007 by the HDB to revitalise mature estates.
On the private residential front, the Ministry of National Development (MND) announced that nine landed estates consisting of more than 4,800 households will undergo its latest Estate Upgrading Programme (EUP). The S$20 million project includes upgrades such as landscaping, enhancing parks and playgrounds, construction of ramps for wheelchair users and covering of drains. The estates to undergo the EUP include Clover Estate, Lentor Estate, Thomson Faber Island Gardens, Toh Tuck Estate, Meng Suan/Springleaf Estates, Happy Gardens, Sea Breeze Garden, Toh Estate, and Jalan Merbok, Jalan Layang-Layang, Jalan Kakatua, Jalan Selating, Jalan Rajawali and Shamah Terrace Estate. The specific upgrades are decided through a “collaborative effort” by the Citizens’ Consultative Committees.