Heedfulness cited sales volume and prices as indicators of

Heedfulness in theSingapore housing market Prices are up again in theprivate housing market, but both demand and supply are moving with caution. By Lee Hui Ying, Edited by Joelyn Chan Housing prices in Singapore are finally onthe mend. Theprivate housing market seems to be rising out of the doldrums. Sales volumesbegan climbing in the first quarter of 2016, and prices are now on the rise aswell. OnJanuary 26, the Urban Redevelopment Authority posted a general1.

1% increasein prices for 2017. This bucks the downward trend that has plaguedthe market for 15 quarters since 2013. This period saw prices fall 12%, buta reversal seems likely this year. American bank Morgan Stanley forecasts a 10%hike in property prices by the end of 2018. Other analysts are morecircumspect with their projections, with estimates ranging from 3%. Still, thegeneral sentiment is that the private property market is on the road torecovery. TriciaSong leads Singapore research at Colliers International.

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She cited sales volumeand prices as indicators of a strengthening property market. “It shouldcontinue to recover this year in view of a steady pipeline of upcoming projectsand positive market sentiment,” she said. (Source:The Straits Times) Both demand and supply factors have a handin this. Economicand income growth has stirred pent-up demand. Also, indications that propertyprices are bottoming out are strong pull factors.

A belief in long-term capitalappreciation is prevalent among potential home owners. Many buyers are thuskeen to snap houses up while they are still cheaper. Atthe same time, the government continues to regulate land provision. It keepsland supply on a tight leash through the Government Land Sales Programme.Developers are desperate to get their hands on more land so that they can cashin on improving sales. This is all the more so given that their unsoldinventory is reaching all-time lows.

As such, land-starved developers haveresorted to collective home sales. This has sparked off an ongoing en blocfever, the first since 2007. The The 15deals concluded so far are worth a whopping S$5 billion, dwarfing 2016’stotals of $1.2 billion. In this year alone, threesites in Clementi, Upper Bukit Timah and Farrer Road went for $1.04billion. High prices seem likelier as developers fork out more and more forprime sites. Assuch, pent-up demand is outpacing tight supply.

Analysts thus expect an upwardprice trajectory after a 3-year journey down a trough. The market is heating up as the governmentscales back cooling measures. Recentpolicy moves have had the same impact as these economic forces. In March 2017,the Ministry of Finance, Ministry of National Development and the MonetaryAuthority of Singapore laid out in ajoint statement “calibrated adjustments” to the seller’s stamp duties (SSD)and total debt servicing ratio (TDSR) framework.

 Thesechanges will not push prices up, but they have served to fuel improving sentiments.The move was well-received, with property developers benefiting from a stockmarket rally. Home buyers who had been waiting on the sidelines also jumpedinto the market. This was especially so with the relaxation of TDSR, which hasconstrained demand. Yet, there is still caution in thecooling. Thegovernment has been careful to emphasise that a wholesale withdrawal is not onthe cards. For instance, it did not change other important restrictions, suchas the additional buyers’ stamp duty (ABSD) and loan-to-valuation (LTV) limits. RaviMenon, managing director of the Monetary Authority of Singapore (MAS), assertsthat these limits are still necessary.

He warned that further easing would”send a wrong signal” in the regional property markets. Elsewhere, governmentsare clamping down on exuberance in their own property sectors. Already,properties in Singapore are relativelycheaper, making them more attractive to investors. A broad-based relaxationwould result in capital swooping in on Singapore’s properties. The governmentwants to avoid this, as it would likely spark a renewed hike in housing prices. Thus,the government prefers to wait and see.

Any commitment to scaling back themarket curbs might be premature and careless. Other stakeholders are also wary. Bothbuyers and developers seem to share this approach. The former remainprice-sensitive despite the partial relaxation of cooling measures. This isespecially so given the government’s aversion to further adjustments.

 Neitheris the en bloc bull run a definite indicator of an impending property bubble.Developers are now expected to build and sell units within a period of 5 yearsto avoid ABSD. As such, demand for large sites is cooling as developers prefersmaller parcels of land. Higherdevelopment charges also provide an extra retardant on the en bloc rush.

 Furthermore,the private property sector is tracking Budget developments. There have beenreports that MAS might act on its warnings of “excessive exuberance” in en blocsales. Thus, the upcoming Budget statement this February have kept developerson their toes. Hence,all the players in the private property market are waiting… and watching. Itseems to have turned a corner, but no one will be resting on their laurels.