Post-cooling measures, property prices 'closer to fundamentals

Visitors crowds as seen in many new launches like Avenue South Residence

EVEN in the midst of accommodative financial conditions today, rate movements of real estate have moderated over the quarters since July 2018 – when additional cooling measures were put in place – and maintained “modest” in quarter 2 and 3 of this year, the Monetary Authority of Singapore (MAS) commented in its yearly Financial Stability Review (FSR) on Thursday.

In 2018, the Additional Buyer’s Stamp Duty (ABSD) rates were amended. The regulator has tightened loan-to-value (LTV) limits for residential property purchases as well. These have contributed in bringing property market prices “closer to fundamentals”, MAS mentioned.

Prices went up by 2.1% year-on-year in Q3 2019, however this was less than the 9.1% jump in Q2 2018 compared to one year ago. (The cooling measures was effect since Q3 2018). Relatively healthy sales were recorded just for “selected new projects”, with others showing “only a moderate response”, MAS said.

This also comes as a study by the IMF – released within the FSR – mentions that Singapore’s private property rates appear to have decoupled from the worldwide chase for capital gains and yield. Macro-prudential measures by the country’s regulators since 2013 have focused on foreign buyers and speculators – the pacemakers behind the asset chase on Singapore properties, concluded the IMF study.

Prices in the private residential real estate market grew by nearly 16% between 2010 and 2013, the report commented. Speculative activity, as shown by the large shares of short-term resales, and interest from foreigner buyers, was high during this period. Notably, purchases by foreign buyers reached their peak of approximately 20% of all transactions in 2011.

Today, activity by corporations and foreigners have stabilized over the past year in the private residential real estate market, the MAS Financial Stability Review revealed.

The share of purchases by foreign buyers account for 5 to 6% of total transactions over the past 3 quarters, and corporations contributed a share of 1 to 2%.

The report revealed that a boom in residential real estate prices could have induced the appetite of corporate investors and foreign buyers for the domestic real estate market.

Meanwhile, short-term resales could be positively related to residential real estate prices as flippers were timing the market, disposing their properties when rates were climbing fast.

“In these cases, the jump in residential property prices would be positively correlated with the number of transactions,” the report revealed. This is what happened with the other UOL condominium Clavon Price.

Foreigners’ purchases were discovered to have the greatest impact on the growth of residential real estate prices, with the effects “economically significant”.

And despite forming up a small portion of the residential real estate market, speculators had an outsized impact on real estate prices too. Property flippers – which form approximately 5% of total resale transactions between 2004 and 2012 – can impact property prices by inducing a positive feedback to rental investors and owner-occupiers.


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