Tuesday, March 29, 2011

Singapore property cooling measures are effective, shows Q1 2011 data

It has been more than 2 months since Singapore government introduced last round of property cooling measures; and now enough data is available to answer the question of whether they were cooling the property market can be answered.

The answer is yes according to the flash estimates of , NUS Singapore Residential Price Index (SRPI). This index tracks the month-on-month price movements of private, non-landed and completed residential properties in Singapore. Flash estimates show that non-central property prices declined -1.5% m-o-m in February 2011 after a 2.8% m-o-m increase in January 2011. These 2 figures actually tell the story. Last property cooling measures were introduced in mid January 2011 and due to the first half of January there is an increase. But the month immediately following it, Feb 2011, has a decline of 1.5%.

Central units still recorded m-o-m increase of 1% in February 2011, down from 3.1% increase in January 2011.   These figures are interpreted in Singapore media as "stabilizing". Thanks to central properties, which are targeted by buyers with more cash (so not effected much with lowered LTV ratio)  overall prices recorded a 1% m-o-m increase.

"The Jan 13 cooling measures are certainly working. The lower loan-to-value limit has affected investors with outstanding housing loans even if they have some financial capacity to purchase another residential property. Home prices in Singapore are likely to drift at current levels unless the government opens the immigration tap again and removes some of these very severe cooling measures such as seller's stamp duty rates and 60 percent LTV for those with existing housing loans".
Tan Tiong Cheng, Knight Frank Chairman 
Source: The Business Times
But this data may well signal decline in the near future. Although developers have great holding power after the buoyant year of 2010, now they look like in a mood of rush to sell their projects before demand declines more. We should not forget that we are sitting on a highly unusual 17% year-on-year price rise so the developers as well as sellers have room to "discount" to sell fast. This does not mean the prices will fall fast like a crash, because that needs another financial crisis, but buyers may well expect a buyer's market in the next few months.

Knight Frank, points to a slowdown in their Singapore Residential Highlights 1Q 2011 report dating March 30th 2011:
"Buying activities in the primary property market showed signs of cooling down after the fourth round of government cooling measures in January this year.  Notwithstanding this, the number of new launches did not decline where more than 4,400 units were launched. About 3,300 new homes were transacted over the 3-month period, a  dip of 22% q-o-q or 25% y-o-y. On average,  around  1,100 units were sold every month, 12% below that of 1,382 units in 2010.  A good number of showflats saw a drop in visitors in contrast to the buoyant situation in the second half of 2010. Buyers and investors were deterred from property market partially due to having to pay higher seller’s stamp duty and  a higher down payment as a result of  a lower loan to value ratio." 
This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered. 

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