Residential Market News Extract - 11 October 2012

Home prices unlikely to fall in next 12 months

While residential prices can be expected to moderate in the fourth quarter (Q4), they are unlikely to dip in the next 12 months.

Prices of resale housing board (HDB) flats could inch up by 0.5 per cent in Q4 and private non-landed home prices are likely to see a marginal 0-0.5 per cent increase.

This is in comparison with the expectation that HDB resale prices would increase by 2-2.5 per cent and private non-landed homes would increase 0.8 per cent quarter-on-quarter, before the latest cooling measures were announced..

That being said, prices are unlikely to fall, given the low interest rate environment and the fact that the market is flush with liquidity.

 The underlying support for the residential market is still the low interest rate environment, which will ensure market activity over the next 12 months.

Despite this, the latest set of measures, which include a 35-year cap implemented on loan tenures alongside tighter loan-to-value (LTV) ratios, may result in moderated sales takeup.

Some buyers may be priced out of the market because of the cap on loan tenures which results in higher monthly instalments.

The bigger impact will come from buyers who postpone their purchasing decisions in the expectation that the market will correct itself.

Another potential impact of the measures is that HDB upgraders who previously may have held on to their flats for investment purposes would now have to let go of their HDB flats

Source: Business Times – 11 October 2012