Hopes of tweaking cooling measures revived

Romesh Navaratnarajah22 Dec 2016

Private property

Will the property cooling measures be eased in 2017? 

Hopes of seeing the government tweak the property cooling measures have been rekindled after the US Federal Reserve signalled a faster pace of interest rate hikes in 2017, reported The Business Times.

Expecting stronger economic headwinds, some industry players believe that it is better to ease the measures now than try to revive the market when the economy is already in a dire state.

However, it may be too early to unwind the policies now given that the cycle of Fed rate hikes has just started, and most central banks have taken a wait-and-see approach.

Also, the private residential market does not seem to need any propping up as it registered more moderate price declines from the previous year, while witnessing a recovery in sales momentum.

In the first 11 months of the year, developers sold 11,573 private residential and executive condominium (EC) units, surpassing the 9,990 units sold for the whole of 2015.

Resale volumes increased by 27 percent during the first three quarters than in the same period last year, due to the narrowing of the price expectation gap between buyers and sellers.

The improvement in transactions is, in fact, setting the stage for a sustainable recovery within the housing sector.

The constraints brought forth by the TDSR has not dented investment appetite for residential properties as shown in the brisk sales recorded in some project launches this year, particularly those offering many smaller units with palatable quantums.

A study of project launches with at least 100 housing units indicates that the average take-up rate (based on all units) was 41 percent in the first month of launch, an improvement from 25 percent for project launches in 2015.

Moreover, the supply pipeline of housing units to be completed has steadily dropped from the peak in Q1 2013.

More than 50 percent of the 43,693 private residential units (excluding ECs) in the pipeline as at end-Q3 2016 have been sold, bringing the number of unsold units to 20,577.

The remaining 47 percent of units left unsold is below the historical average of 58.7 percent since 2001.

However, some signs of strains have emerged. The MAS revealed that the share of mortgage loans over 30 days in arrears rose to nearly one percent in September, while non-performing housing loans climbed to 0.4 percent.

Despite the uncertain economic environment, views on the property cooling measures remain mixed.

OCBC Bank analyst Eli Lee, for instance, believes that there is significant scope to unwind the measures.

Since 1985, he noted that the government had loosened its stance in three instances (1997, 2001 and 2008) after property prices fell by 8.3 percent to 16.4 percent.

In Q3 2016, private home prices were 10.8 percent below their peak in Q3 2013.

Maybank Kim Eng analyst Derrick Heng, on the other hand, said Hong Kong’s recent policy tightening should make Singapore wary of fund flows from overseas markets in case it loosens the measures.

To support the prime residential segment, others believe that the Additional Buyer’s Stamp Duty (ABSD) on home acquisitions by foreigners can be tweaked without affecting the mass market. This line of argument is, however, misguided.

Foreigners’ share of residential purchases within the city-fringe and suburban regions dropped only after the ABSD was introduced in December 2011 – from 17.5 percent in Q4 2011 to about 5.5 percent in Q4 2016.

In recent quarters, the suburban region has accounted for over 40 percent of home purchases by foreigners.


Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

s singh
Dec 27, 2016
It is premature to tweak the measures in place to ensure speculation is reduced and individuals do not take on debt which will hurt them and the wider economy. The rising sales volume is a reflection that at the right price the prospective buyers will purchase. If the new developments are being priced appropriately we will continue to see the sales volume grow and maintain the anti-speculative measures in place.

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