What does the future hold for Singapore’s property market this year? Our Singapore correspondent gazes into the crystal ball to help agents and consumers navigate their way.
By Khalil Adis
Expect a subdued property market in 2015, driven by genuine home buyers, particularly in the mass market segment in the suburban areas.
Meanwhile, the mid to high-end segments, which tend to attract many speculators, will see very little transactions due to the various cooling measures such as the Additional Buyers’ Stamp Duty (ABSD), Sellers’ Stamp Duty and Total Debt Service Ratio (TDSR).
This is in line with the Singapore government’s promise during the 2011 general election to ensure property prices remain within reach for first time home owners and those who genuinely need a home.
2015 will be a crucial year for both developers as well as the government as each has their own vested interest – developers must sell off their units within two years upon completion while the government wants to ensure property prices remain sustainable.
As a result, those in the mid to high-end segment will be under pressure to sell off their remaining units, failing which they have to pay a levy, calculated at 8 per cent, 16 per cent and 24 per cent of the property purchase price for the first, second and third extra years respectively.
The public housing market
Often referred to as the HDB (Housing Development Board) market, the government has been rolling out new supply of 22,455 Built-To Order (BTO) flats in 2014.
Public housing was a contentious issue during the 2011 general election as there was limited supply of new BTO flats, forcing many to turn to the resale market where it is more expensive or couples to delay their marriage.
Million dollar HDB flats had become the norm, and as a result, many had expressed their discontent via the ballot box.
Since then, the HDB has been rolling out almost 20,000 new flats per year to ease pressure from the resale market.
In 2014, most of the demand from singles and first-timer families had already been met by the HDB.
As a result, lesser flats will be launched by the HDB in 2015 – a total of 16,900 new BTO flats to cater to first-time families, second timer families and for those applying to live with or near their parents.
Most of the new launches will be taking place in the suburban areas.
According to the HDB, it will offer about 3,940 flats in Bukit Batok, Geylang and Hougang for new sales launches in February 2015.
This is good news for genuine home owners as they will have more choices and do not have to buy from the resale market.
In addition, the costs will be significantly lesser, including whatever grants that they would qualify for.
Resale HDB market
The resale HDB market will continue to see a downward trend in the Resale Price Index (RPI) due to the new supply of 16,900 BTO flats coming on-stream next year.
According to the HDB, the RPI fell by 1.7 per cent from 195.7 points in the second quarter of 2014 to 192.4 points in the third quarter 2014.
This is expected to fall even further next year.
For those looking to sell your HDB flat, it will be a tough market ahead as it will be buyers’ market.
Therefore, sellers must have a realistic selling price if they want to sell off their flats within a short time frame, particularly those who urgently need cash.
I would urge those who with holding power, to wait till 2016 before you sell off your HDB flat.
For buyers, particularly those who cannot wait three years to get your new HDB flat, this is the time to start house hunting as sellers will be more realistic in their pricing.
For agents, the resale market will be rather subdued, driven by those in the suburban areas.
Agents must advice their clients to be more realistic in their asking prices when marketing their properties.
The private property market
It will be a subdued market ahead in the private property sector with most of the launches centred in the mass market segment.
Mass market projects will drive the market in 2015 as they are more affordable and driven by genuine home owners.
Buyers, this is the time to start hunting for new homes.
Agents should focus on the mass market segment.
The oversupply and existing stock in the market will add pressure to rental yields and for developer to offer more carrots to lure potential home buyers.
According to the Urban Redevelopment Authority (URA), there would be about 97,180 private housing and executive condo (EC) units in the overall pipeline supply.
Of this, 4,336 units (including ECs) will be completed in the last quarter of 2014.
Overall, 20,852 units will be completed in 2014.
Another 23,769 units (including ECs) are expected to be completed in 2015.
Developers who had launched their mid to luxury segment projects in the past will likely reduce prices so that they can get rid of their stock before the levy kicks in.
According to the URA, the stock of completed private residential units (excluding ECs) increased by 4,512 units in the third quarter of 2014.
It is also highly likely we will see more of such developers asking from an extension from the government.
Developers who had bought land banks in the mid to luxury end of the market are unlikely to launch them in 2015.
Investors looking to rent out your units, it will be a tough market ahead.
The private property market will also continue to see a downward trend in terms if the Private Property Index (PPI), due to the various cooling measures, new supply coming on-stream, Government Land Sales (GLS) programme as well as unsold units from 2014.
Figures from the Urban Redevelopment Authority (URA) showed that prices of private residential properties decreased by 0.7 per cent in the third quarter of 2014, following the 1.0 per cent decline in the previous quarter.
This was the fourth straight quarter of price decline.
Price decline will likely be steepest in the luxury segment with fire sales expected from investors without any holding power.
Expect fire sales on Sentosa Cove, Orchard Road, Tanglin, Novena, Marina Bay and the CBD areas.
Buyers, this is the time to snap good deals as it will be a buyers’ market sellers will be more realistic in the asking price.
Sellers, be prepared to sell at a loss.
Agents, this is also a good market to focus on.
This story was first published by iProperty.com Malaysia