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Private home prices fall in Q4 for 9th straight quarter

SINGAPORE — Private home prices fell in the final quarter of last year for a ninth straight quarter, marking the longest losing streak in 17 years, as cooling measures and loan curbs continued to weigh on the market.

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SINGAPORE — Private home prices fell in the final quarter of last year for a ninth straight quarter, marking the longest losing streak in 17 years, as cooling measures and loan curbs continued to weigh on the market. 

Analysts said that while the pace of decline has slowed, the downtrend remains intact as prices are vulnerable to higher borrowing costs this year after the United States Federal Reserve last month started on its path to normalise interest rates.

The private residential property index fell 0.5 per cent to 141.6 points in the fourth quarter from 142.3 points in the third quarter, preliminary data published by the Urban Redevelopment Authority (URA) showed today (Jan 4), narrowing from the 1.3 per cent fall in the third quarter. The stretch of declines was the longest since the last quarter of 1998, when the market was still reeling from the effects of the Asian financial crisis that began a year earlier. 

For the whole of last year, private home prices fell by 3.7 per cent, compared with the 4 per cent decline in 2014.

“The overall price decline in 2015 reflects the current languid market sentiment and the sustained impact of the cooling measures. However, this is the lowest fall in more than two years,” said PropNex Realty chief executive officer Ismail Gafoor. 

Prices of non-landed private homes fell 0.4 per cent in the Core Central Region (CCR), or city centre, in the fourth quarter from the third, moderating from the 1.2 per cent decline in the previous quarter, the flash data showed. There were no price changes for homes in the Rest of Central Region (RCR), or city fringes, and the Outside Central Region (OCR), or suburbs, compared with the 1.6 per cent declines in each segment previously. For the whole of last year, prices in the CCR, RCR and OCR fell by 2.6 per cent, 3.9 per cent and 3.7 per cent, respectively.

In the landed property segment, prices fell 2.1 per cent, extending from the 0.4 per cent decline in the previous quarter. For the whole of last year, prices of landed homes slipped 4.4 per cent, the URA data showed.

Analysts expect private home prices to fall further in the year ahead.

Mr Eugene Lim, key executive officer at property agency ERA, said: “This trend of decreasing prices is expected to continue in 2016 with the normalisation of interest rates and the weakening Singapore economy adding to the downward pressure.”

The US central bank last month raised its federal funds rate target for the first time in seven years — to between 0.25 and 0.5 per cent, with further gradual hikes widely expected this year. 

The Singapore Interbank Offered Rate (SIBOR) and the Swap Offered Rate (SOR) — the two key benchmarks against which the vast majority of housing loans here are pegged against — are expected to broadly move in line with US interest rates and raise mortgage costs.

 Meanwhile, Minister for National Development Lawrence Wong had said last week that it was still too early to unwind some of the property cooling measures, Mr Lim pointed out.

“The measures will probably stay for the first half of 2016 at least. Hence, prices are expected to continue staying depressed for the near future,” Mr Lim said.

Mr Ismail said: “While reasonably priced homes with desirable product and location attributes will continue to find favour with home buyers, the private residential market looks set to continue its price decline, with weak demand due to various factors, with the Total Debt Servicing Ratio and Additional Buyer’s Stamp Duty working in tandem to rein in exuberant home buying.”

Besides rising rates, cooling measures, loan curbs and a slow economy, the private housing market will face the additional challenges of large upcoming supply, rising vacancy rates and weak leasing demand, said Mr Nicholas Mak, head of Research and Consultancy at SLP International Property Consultants.

“With the absence of catalysts needed to spur a price recovery, the overall private residential price index is projected to fall by 0.8 to 1.8 per cent in the first half of 2016,” he said.

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