Oct 02, 2013

    Home prices slip as credit curbs bite

    SINGAPORE home prices softened in the third quarter, with some analysts predicting further declines in prices of Housing Board flats as recent credit restrictions on home buyers began to hurt demand.

    According to flash estimates released yesterday, resale prices of HDB flats fell for the first time in over four years, with the index dipping 0.7 per cent in the July-September quarter, compared to the preceding three months.

    The Urban Redevelopment Authority's index of private-home prices edged 0.4 per cent higher in the third quarter from the second, as prices of homes in outlying areas rose.

    But prices of apartments in the core central region fell 0.5 per cent while prices in the rest of the central region dropped 1.1 per cent - the first decline in 11/2 years. `

    Analysts attributed the weakness in third-quarter home prices to measures introduced between late June and August this year that capped the amount of loans that can be extended to borrowers' incomes. While private-home prices could hold at current levels, HDB resale prices are likely to fall in coming quarters.

    "The reduction of the mortgage servicing ratio to 30 per cent of a borrower's gross monthly income has taken its full effect on resale prices," said PropNex Realty CEO Mohamed Ismail.

    Previously, HDB buyers could use up to 35 per cent of their monthly income to service their housing loan.

    Other factors affecting demand for resale HDB apartments include the greater availability of new units as well as new restrictions on HDB purchases by foreigners with permanent-residency status.

    "Moving into 2014, the HDB resale market can expect negative price growth, possibly in the range of 3 to 5 per cent," Mr Ismail added.

    Ms Chia Siew Chuin, director of research and advisory at Colliers International in Singapore, said that while cheaper mass-market homes outside the central region continue to attract buyers, overall affordability has been affected by the Government's cooling measures.

    "Consequently, some developers have responded by fine-tuning selling prices," she said.