Singapore private home prices to rise by 10 per cent by next year end

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Singapore private home prices may rise as much as 10 per cent by the end of next year said Morgan Stanley analysts in a note to clients on Friday. According to the note, Singapore private home prices are set to double by 2030 as faster income growth overpowers recent property curbs and higher interest rates.

Noting the Singapore private home prices hike in four of the five previous rate-hike cycles, the American multinational investment bank and financial services company said faster economic growth, the Republic’s attraction as a global hub, as well as demand from buyers flush with cash from en bloc sales, will underpin the housing market.

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Morgan Stanley’s bullish prediction on the upward direction of the Singapore private home prices comes after another prominent real estate services company suggested that the property market here will collapse after the property cooling measures.

Singapore private home pricesCushman & Wakefield Inc in speaking to Bloomberg pointed out that the Government’s latest property cooling measures have caused the en bloc sales market collapse. In referring to data compiled by her company, Christine Li, head of research for Singapore at Cushman said, “the collective sales market was decimated after the recent cooling measures.”

Morgan Stanley analyst Wilson Ng and his colleagues said: “Contrary to common perception, we believe housing supply/demand dynamics remain favourable, and we anticipate a wave of capital inflows into the housing market. Housing supply is still below historical averages and set to fall.”

The property cooling measures – higher additional buyer’s stamp duty (ABSD) and lower loan-to-value (LTV) limit – took the market by surprise as recent trends suggest that the private residential market is finding its own equilibrium. The en bloc sales market collapse have been amplified by developers being less active in the collective sale market, while new homes sales at some recent launches have moderated.

The introduction of these fresh property cooling actions a year into market recovery, after four years of decline, was aimed at calming the euphoria in the private residential sector. Home prices had risen by 3.9 per cent in Q1 2018, and another 3.4 per cent  in Q2 according to flash estimates. The price growth – which was tapered in the last quarter – was largely driven by the brighter economic outlook, pent-up housing demand and more positive market sentiment.

Morgan Stanley analysts however, feels that there is no need to be alarmist. It expect policy interventions to apply equally to both up- and down-cycles.

So if Singapore private home prices decline, the Government could relax some of the property curb measures.

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Colliers International however has somewhat of a different views. Commenting said on the heels of the property cooling measures introduction in July that the curbs – being the ninth round of property cooling initiatives since 2009 – the firm said the measures will put a drag on Singapore private home prices this year as the higher ABSD could curtail investment demand from both locals and foreigners, and the larger cash outlay required for down payment on homes weighs on buying interest.

Ms Tricia Song, Head of Research for Singapore at Colliers International, said then: “Based on our analysis, the collective sales that have been concluded since 2016 could generate around 25,000 new homes from 2021 onwards. Coupled with the moderate Government land sales sites over the past two years, the upcoming supply of new units in the medium term does not look excessive as long as economic fundamentals remain sound. Given that developers have exercised more restraint in bidding for collective sale sites in recent months, the launch pipeline should remain fairly sustainable over the next 3-4 years, and we do not think developers necessarily need to embark on deep price cuts to sell units especially if the new launches are paced out evenly.”

The Minister for National Development said in early October that it was premature to say if the property cooling actions introduced on July 5 achieved its intended objectives of moderating Singapore private home prices.

The Minister, Mr Lawrence Wong, said:

“The property cooling measures implemented on 6 July 2018 are intended to moderate the residential property market cycle and keep price increases in line with economic fundamentals. Loan-to-Value (LTV) limits were tightened across all housing loans, including those taken by first-time buyers, as the price increases prior to the measures were broad-based across the market, reflecting demand from all types of buyers. However, we maintained Additional Buyer’s Stamp Duty (ABSD) rates for Singapore Citizens and Permanent Residents buying their first residential property.

As the measures were only introduced recently, it is premature to conclude whether they have been effective. Nevertheless, there are early signs that the measures may have kept the pace of price increase in check. Based on URA’s latest flash estimate of the Property Price Index, prices increased by 0.5% in 3Q2018, compared to 3.9% and 3.4% in 1Q and 2Q2018 respectively.

The Government will continue to monitor trends in the property market, and adjust our policies as necessary, to maintain a stable and sustainable property market.”

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