Unlikely to have Significant Drop in Property Prices

Channel News Asia: Significant drop in property prices unlikely: analysts

Jan 27

SINGAPORE : The recent government cooling measures in Singapore's property market will bring down sales volume, but not to the extent of causing a significant fall in prices.

According to a report by DTZ Research, sales volume is expected to fall as short-term speculators will be weeded out by the hefty seller's stamp duty of up to 16 per cent within the first year of purchase.

However, the property consultancy said not all investors will withdraw from the market.

Some may find the 4 per cent stamp duty by the fourth year of sale to be surmountable and shift their focus to buying uncompleted units with completion dates three to four years later.

DTZ's Executive Director for Residential, Margaret Thean said landed homes, small apartments and high-end apartments will be less affected by the measures. That's because small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units.

Thean added that the 4-year seller's stamp duty will have little impact on landed homes as most purchase them for long-term owner-occupation.

Meanwhile, high-end apartments will likely continue to see foreign interest.

DTZ added that prices in 2011 are expected to be largely stable with a decline of not more than 5 per cent.

This is underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar and inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong.

The property consultancy does not rule out the possibility of more government measures should demand remain at a high level after a period of cooling-off.

The report also noted other challenges in the form of a spike in the number of completed units in a few years' time as the government is putting out a record high amount of units through the public housing and government land sales programmes.

There is also uncertainty over the strength of recovery of the major western economies.

If they recover well, interest rates will move up and reduce the affordability of mortgage payments.

On the other hand, if they continue to languish, this will have an effect on the Singapore economy and optimism in the property market eventually.

With the residential market facing numerous challenges, DTZ said investors are likely to take the extra effort to identify opportunities in other property sectors and alternative investment products.