Dec 05, 2013

    Property cooling measures show results

    THE Government's measures to cool the residential-property market have had significant impact: Transaction volumes have plunged, new home-loan sales have contracted and loan-to-value (LTV) ratios have improved.

    "The series of property-related measures taken by the Government over the past few years has dampened momentum in the market," said the Monetary Authority of Singapore Financial Stability Review 2013 on Tuesday.

    The increase in the private-property price index has moderated since Q3 2009, with the average quarter-on-quarter rise of 0.67 per cent in the first three quarters of this year lower than the 0.70 per cent for last year and 1.43 per cent for 2011, the Review said.

    Momentum has varied across different market segments. Prices of private residential properties in the Outside Central Region on average increased by 2.5 per cent per quarter this year. In contrast, prices in the Rest of Central Region and the Core Central Region have started to show some weakness, turning negative in Q3 this year.

    Overall transactions have fallen by about a third while investment/speculative demand for home loans has halved.

    Average monthly transactions fell to 2,100 units in the first 10 months of this year from 3,200 units last year. The fall in overall sales was driven by resale transactions, which fell by about half this year (from an average of 1,100 units per month last year to 600 units this year). New sales also dropped significantly to an average of 900 units per month between July and October this year (compared with an average of 1,600 units per month between 2011 and last year) following the implementation of the Total Debt Servicing Ratio framework at the end of June. Sub-sale activity has remained subdued.

    The measures appear to have had a dampening effect on the growth of outstanding housing loans, with the year-on-year growth slowing from a peak of 22 per cent in September 2010 to 12 per cent in September this year.

    The volume of new housing loans, which reflects trends in overall demand in the property market, has contracted to $8.8 billion in Q3 this year, from $13.5 billion a year earlier.

    The share of new housing loans with LTV ratios higher than 70 per cent has also fallen from a peak of 77 per cent in Q2 2010 to stabilise at about 66 per cent since last year.

    The average LTV ratio of outstanding housing loans was 47.3 per cent in Q3 this year. The asset quality of property-related loans remains robust, with the non-performing loan (NPL) ratio at less than 0.5 per cent in Q3 this year.

    Speculators seemed to have left the market in droves, with foreign buyers under 10 per cent. "Borrowers taking up a second or subsequent housing loan accounted for about 30 per cent of new housing loans in 2011. This share has dipped to 14 per cent in Q3 2013," said the Review.

    The share of foreign purchases in total transactions continues to be small, at 9 per cent in Q3 this year, following the implementation of additional buyer stamp duty.

    Furthermore, the average loan tenure of new housing loans has shortened, from 30 years in Q3 last year to about 24 years.

    While the NPL ratio for housing loans remains low, close monitoring is warranted, it said.

    "Strains on borrowers can quickly materialise if the economic outlook and employment conditions worsen, or interest rates - and therefore mortgage repayments - increase.

    The Review also noted the ample supply. In Q3 this year, there was a total supply of about 84,900 uncompleted private residential units from projects in the pipeline, an increase of about 13 per cent compared with the average supply in the last three years. Of these uncompleted units, about 37 per cent remained unsold in Q3 this year.

    Apart from these, there were also 12,400 executive condominium (EC) units in the pipeline.

    In addition, another 10,000 units will soon be added to the pipeline. In all, there will be about 107,400 private-housing and EC units in the pipeline, many of which are expected to be completed over the next three to four years.

    "While the property-related measures taken over the past few years have dampened momentum in the property market, vigilance is needed.

    "Price levels remain high. The Government will continue to monitor the property market closely and, if necessary, step in to ensure stability and sustainability," the Review said.