Home prices may drop 5-10% in 2012

The rate of price increases has been slowing significantly in 2011 and will continue to do so next year.

The government has been monitoring the private residential market closely and has introduced a series of property measures since September 2009 to curb excessive speculation and prevent runaway prices, says CBRE’s report.

The first four rounds of measures were targeted at speculative activity in the residential market.

URA data showed that sub-sales fell from 13.4% of total home sales volume in 2008 to 7.7 per cent by Q3 2011.

New home sales volume remained strong from 2009 to 2011 despite the measures, showing the strength of underlying demand from genuine homebuyers. Unlike 2007, demand in this period was driven by mass-market and upgrader-type homes.

At the same time, demand for resale flats was equally strong and resulted in a continual rise from Q3 05 to Q3 11. HDB resale prices have risen by 85.0 per cent above its trough and are at all-time high levels. This rising trend enabled private home prices to follow in tandem upon its recovery from the global financial crisis. In total, it has risen by 54.3 per cent since the trough in Q2 2009. It is possible that prices could have soared higher if there had been no property measures to cool the market. The rate of price increase has slowed significantly in
2011. It is estimated to register a total rise of 6.0 per cent to 6.5 per cent compared to the rise of 17.9 per cent in 2010.

Based on URA’s caveat data lodged in January-November 2011, 28.7% of the homes in the Core Central Region were purchased by foreigners. Singaporean buyers bought 51.1 per cent of this class of properties. In the Rest of Central Region, foreigners accounted for 20.2 per cent and Singaporeans, for 62.5 per cent of the homes sold. As for Outside Central Region, the foreigners’ share is reduced to 14.4 per cent while Singaporeans dominate the market with a 69.9 per cent share of the units sold.

Joseph Tan, Executive Director, Residential, said “These numbers show that foreign buyers are more active in the CCR and RCR where the luxury and prime properties are located. For  example, of the 209 caveats lodged for d’Leedon condominium in 2011, 64 (30.6 per cent) were lodged by foreigners; and of the 39 caveats lodged for Rivergate, 22 (56.4 per cent) were lodged by foreigners. Foreigners are less attracted to mass market homes in OCR. Of the 483 caveats lodged for A Treasure Trove, only 15 (3.1 per cent) were lodged by foreigners; and of the 426 caveats lodged for Eight Courtyards, 29 (6.8 per cent) were lodged by foreigners.

The ABSD measures are introduced to reduce the excessive inflow of foreign liquidity. Therefore, any foreigner intending to buy a home here is likely to reconsider their buying decision in view of the additional 10 per cent stamp duty.

In light of the current buying pattern, it is foreseeable that home prices will ease in 2012. We expect the prices of luxury/prime residential properties to fall by 10 per cent to15 per cent in 2012, whereas mass-market homes could fall by 5 per cent to10 per cent. Separately, landed home prices will likely see a smaller correction of less than 5 per cent since foreigners are generally not allowed to buy and supply is limited.

However, we are of the opinion that these measures are unlikely to be a permanent feature because of the nature of Singapore’s highly open economy.”