The Pearl Bank Apartments. With the Government’s latest cooling measures, owners attempting a collective sale will have to reduce their asking price to seal the deal.
SINGAPORE — Although still a good hedge against inflation, the days of making a quick buck from property are over, declared a senior property analyst on Tuesday (July 17).
With the Government’s latest cooling measures, owners attempting a collective sale will have to reduce their asking price to seal the deal as the cost of land acquisition has increased significantly for developers, said JLL’s head of research and consultancy Tay Huey Ying at an industry seminar organised by the Real Estate Developers’ Association of Singapore (Redas).
The cooling measures that took effect on July 6 saw Additional Buyer’s Stamp Duty (ABSD) rates raised and Loan-to-Value limits tightened for Singapore citizens, permanent residents and foreigners in a bid to “keep prices in line with economic fundamentals”.
Besides a 10 percentage-point increase in ABSD rates for developers, they are also subjected to a 5 per cent ABSD that is non-remittable if they buy residential properties for development.
Homeowners typically make higher profits by going en bloc than by selling their homes on the resale market.
Although there is “still room for collective sale activity”, the en bloc market will slow down further, Ms Tay said.
The pace was already waning before the cooling measures took effect, as developers had sufficiently replenished their land bank through successful collective sales last year and in the first half of this year, she said.
Ms Tay expects some time for an equilibrium price to be reached, and said the slowing en bloc market could be positive for the wider property market as unsold inventory will be reduced, providing opportunities for the next wave of collective sales.
NO RUNAWAY PRICES
Going forward, private home prices are likely to increase despite the latest cooling measures, albeit at a moderate pace, she said.
“Historically, home prices have been known to be notoriously resilient against downward forces,” said Ms Tay, pointing out how prices inched up by 30 per cent between 2010 and 2013 despite several rounds of cooling measures during that period.
Even when prices turned the corner in 2013, Ms Tay said it was an “inelastic downward” shift of 11.6 per cent over four years.
Homeowners were able to ride out the downturn as they were in a strong cash flow position and did not feel the urgent need to sell their homes, noted Ms Tay.
The current environment of steady economic and employment growth will support an increase in prices in the near- to mid-term, as long as there are no shocks – such as a full-blown trade war – that send the Singapore economy into a recession, she said.
However, “the minute prices threaten to run away… the government will not hesitate to impose further measures”, she said.