Prices of private homes in Singapore are in for a protracted and slow price correction, indicating that measures to cool prices may not achieve their target in time.
A stalemate has set in, with buyers holding out for better prices while sellers and developers exercise their holding power and refusing to budge on prices.
The overall Private Residential Property Price Index, comprising both landed and non-landed homes, fell 0.6% over the third quarter - after slipping 1% in the preceding quarter, said the Singapore Business Times (SBT), quoting flash estimates by the Urban Redevelopment Authority.
Prices have fallen 3.8% over four consecutive quarters.
Resale HDB prices also showed continued weakness under the weight of the mortgage servicing ratio that has shrunk the pool of potential buyers, particularly for larger units, said SBT.
Flash estimates from the HDB showed the resale price index falling 1.6% in the third quarter, after slipping 1.4% in the second quarter.
Resale prices have fallen by 6.8% since the third quarter of last year.
The widening HDB-condo price gap is expected to exercabate the softening of the private mass market, said SBT.
While the price fall for non-landed residential homes has moderated, the URA flash estimates showed that prices of landed properties extended a 1.7% fall in the third quarter, said SBT.
This was probably because the pool of buyers for the more pricey landed properties has shrunk much more than that for private condos due to borrowing constraints under the total debt servicing ratio, said SBT, quotng Ong Teck Hui, JLL national research director.
After the fall in luxury home prices, this is the next category of homes to register a fall in prices.
It looks like the cooling measures are taking effect although at a slower pace for private homes.
For the first time since the 2008 financial crisis, China is relaxing mortgage lending rules to boost sagging property prices that threatened to impact the slowing economy.
This is against data that recorded a fall in average home price across 100 major cities tracked by the China Index Academy, the country’s largest private provider of real estate data, for the fifth straight month.
This came to 10,672 yuan per square metre, down 0.92% from August, when it dropped 0.59% from the previous month, said the South China Morning Post (SCMP).
Under the newly relaxed rules, those who have fully settled outstanding mortgage loans will be considered first-time buyers.
This would make them eligible for a 30% down payment, rather than the 60% stipulated for repeat buyers.
Mortgage loan rates now can also come at a 30% discount to the benchmark lending rate, against the previous 15%, said SCMP.
Despite these measures, house prices are expected to head south although at a slower pace.
Some analysts have cautioned investors against thinking that the housing market and broader economy were poised to stage a stunning recovery, said Reuters.
A glut of unsold or unoccupied homes and buyers’ expectations of further price declines could temper any rebound.
Severe drops in prices will require stabilisation measures to support the sector and help cash-strapped developers.
These cooling measures are aimed at stabilising prices and not to cause any sudden drop.
After Australia, the Bank of England (BoE) is looking at limiting mortgage lending to prevent any overheating of property prices.
BoE is asking for powers to restrict the size of mortgages compared with the value of a property and borrowers’ income, said the Guardian,
The buy-to-let market will be part of its considerations when deciding to apply any restrictions.
Recent data from Nationwide shows house prices fell last month for the first time in 17 months, although average London prices reached another record high of £401,000 - 31% above their 2007 peak - potentially presenting a dilemma for policymakers, said Guardian.
After a series of reforms and penalties, regulators are gunning for hot property prices in their latest target for factors that could destabilise the financial system.
The impact is increasingly felt in countries with burgeoning property prices with some starting to limit lending while others seek to boost continuously sagging prices.
Columnist Yap Leng Kuen sees more awareness of things that could go wrong in the financial system.