Singapore"s Home Sales Rebound to Be Short-Lived: Southeast Asia ~ Marina Bay Sands

Monday, September 16, 2013

Singapore"s Home Sales Rebound to Be Short-Lived: Southeast Asia

7:30 PM Koomhoo No comments

Singapore’s jump in private home

sales last month was only a temporary reprieve for developers as

the government’s cooling measures take root and mortgage rates

begin to rise.

The city’s housing sales climbed 54 percent to 742 in

August from July, when they fell to 482, the lowest in almost

four years, according to government data. With nine rounds of

cooling measures since mid-2009, the increase will be short-lived, according to Mizuho Bank Ltd. and UOB Kay Hian Pte.

Monthly sales averaged about 1,700 units in the first six months

of the year.

“There have been successive rounds of measures coming

through and with mortgage rates also beginning to move up, you

will find that buyers are becoming more circumspect and

wondering if these are the right entry levels,” said Vishnu Varathan, a Singapore-based economist at Mizuho, who forecast
home prices to fall 10 percent to 15 percent by 2016.

Singapore unveiled new rules in June governing how

financial institutions grant property loans to individuals.

Record home prices amid low interest rates raised concerns of a

housing bubble and prompted the government to widen a more than

four-year campaign to curb speculation in Asia’s second-most

expensive housing market, according to a Knight Frank LLP and

Citi Private Bank report.

The new loan framework requires that lenders take a

borrower’s debt into consideration when granting property loans,

the Monetary Authority of Singapore said June 28. Home loans

should not exceed a total debt-servicing ratio of 60 percent and

those that do will be considered imprudent, it said.

“Normalizing interest rates” will pose significant

financial risks to individual borrowers and the economy, the

Ministry of National Development said on its website in response

to questions in parliament yesterday. The property curbs are

needed to avoid a “major price correction,” it said.

Higher Rates

Singapore’s home lending rates have risen about 0.5

percentage points in the past year, according to Keff Hui, a

director at Mortgage Supermart Singapore, a mortgage broker.

Executive condominiums made up almost half of the homes

sold in August, an unprecedented level, according to SLP

International Property Consultants. Including these apartments,

offered with some restrictions such as a monthly household

income cap of S$12,000 ($9,523), August sales were 1,468,

according to the government data.

“The bulk of the sales in August was on the executive

condo side, not on private sales, which shows demand for private

home sales is still low,” said Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian, who expects the number of

residential properties sold to drop 30 percent in the next 12

months and as much as a 10 percent decline in prices. “The

measures are having their impact.”

Record Prices

Among the developers that began sales of projects in August

was Wing Tai Holdings Ltd. (WINGT), which marketed its condominium in

the Tampines area, an eastern suburb of Singapore. It sold 218

units of 337 marketed last month, according to the data. RV

Residences, offered by Allgreen Properties Ltd., in the central

district sold 39 of 83 units marketed, the data showed.

Earlier measures haven’t damped housing values. The private

residential price index rose 1 percent to a record 215.4 points

in the second quarter, extending a 0.6 percent increase in the

first three months, according to data from the Urban

Redevelopment Authority on July 26. Suburban prices climbed 3.8

percent in the June quarter, accelerating from a 1.4 percent

gain in the previous three months, the data showed.

‘Gradual Pace’

“Developers’ sales are expected to improve in the coming

months, but at a more gradual pace,” said Nicholas Mak, an
executive director at SLP in Singapore. “For the whole of 2013,

developers’ private home sales volume is projected to be at a

more sustainable level ranging between 14,000 and 16,000.”

To curb speculation, the government also tightened loan-to-value limits for buyers seeking a second mortgage, referring to

the amount they are allowed to borrow relative to the value of

their properties. The cash down-payment will rise to 25 percent

from 10 percent starting from the second loan, it said.

CapitaLand Ltd. (CAPL) and City Developments Ltd. (CIT), Singapore’s two

biggest publicly traded developers, said in the past two months

they expect “headwinds” in the city’s property market because

of the government curbs.

CapitaLand shares lost 0.6 percent to S$3.12 at 10:05 a.m.

in Singapore trading, while City Developments declined 0.8

percent to S$10.46.

CapitaLand said July 25 it expects prices and sales of

residential properties to moderate. It started preliminary

marketing for its Sky Vue project in the central Singapore

suburb of Bishan over the weekend.

Changing Needs

“In response to market demands, Sky Vue offers slightly

more compact units,” it said in an e-mailed response to queries

yesterday. “Moving forward, we will continue to adjust our

products to cater to changing market needs.”

Regulations on land ownership are also deterring City

Developments. Buying land in Singapore at current high prices

would be “suicidal” given the government’s requirement that

new homes must be sold within two years of completion, Chairman

Kwek Leng Beng said on Aug. 6.

Developers of land for high-end residential projects are

subject to conditions of a so-called qualifying certificate,

which includes the two-year deadline, according to the city’s

rules. Developers can apply for an extension for a fee.

“Developers have been trying to offer discounts, but with

high land prices, and additional buyers’ stamp duty and higher
mortgage rates, they will not be able to absorb it beyond a

point,” Mizhuho’s Varathan said. “Supply is a very real thing,

so seeing spanking new buildings coming up with no real demand

will see some price correction and some pain for developers as

well.”

To contact the reporter on this story:

Pooja Thakur in Singapore at

pthakur@bloomberg.net

To contact the editor responsible for this story:

Andreea Papuc at

apapuc1@bloomberg.net

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