http://www.straitstimes.com/archive/...eport-20141224
Cooling measures not dragging down home prices: Report
Published on Dec 24, 2014 1:05 AM
By Rennie Whang
HOMES have become only marginally more affordable following the many cooling measures introduced over recent years, according to a CBRE report.
Prices have dropped only slightly and the declines for new homes are likely due in part to the median size for a new apartment shrinking, said Ms Han Huan Mei, associate director of research at CBRE Singapore.
She noted that cooling measures have not caused prices to plummet as economic fundamentals are still sound, adding: "As long as home buyers are able to service their loans and developers have the power to hold, home prices are less likely to slide."
The Urban Redevelopment Authority (URA) private residential price index shows that prices peaked in the third quarter of last year, having risen 62 per cent from the second quarter of 2009 when the market began recovering from the global financial crisis.
A range of cooling measures since those heady days have seemingly had only a minor effect on values, with the index down just 3.9 per cent in the 12 months from Oct 1 last year to Sept 30 this year.
On closer look, the median price of new homes rose by 12 per cent to $1.08 million from the start of 2009 to the end of last year but has fallen 9 per cent to $1.02 million over this full year, Ms Han said.
Resale prices have suffered less.
The median price of a home rose by 65 per cent to $1.4 million from the start of 2009 to the end of last year before easing 4 per cent to $1.34 million over this year.
The threshold for new homes has held steady at about $1 million while that for resale homes has been at about $1.3 million for the past five years, Ms Han said.
But the median size of a new home has fallen steadily, from 1,195 sq ft in 2009 to 753 sq ft this year.
Developers have opted to build compact units for new projects to keep the lump sum price affordable, Ms Han said.
But the median size of a resale home has remained constant at above 1,200 sq ft through the years.
Ms Han said the $1 million threshold for new homes is likely to stay as long as wages remain stable and in line with inflation but the squeeze on space will continue if costs increase.
Overall, the URA residential price index - which factors in a weighted "moving average" of transactions over 12 quarters - for all residential homes showed a decline in prices of 3 per cent over the first nine months of this year.
But the fall for new homes was likely around 6 per cent, which is "more likely a function of shrinking size", said Ms Han, while resale home prices fell by about 4 per cent over the same period.
The sharper fall in new home values may also be due to price cuts in some projects nearing completion, as developers focus on clearing unsold units.
The Vermont At Cairnhill sold 37 units in August after prices were trimmed by 12 per cent while about 130 homes at Sky Habitat were sold in April after a price cut of 10 to 15 per cent.
Home sale volumes have dropped by about half one year after the Total Debt Servicing Ratio was introduced and have "continued at a lukewarm pace", Ms Han noted.
She tipped next year's home sales volume to be similar to this year's.
Home prices are likely to "see modest corrections until they reach an equilibrium", she added.
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