Sunday, February 21, 2010

New home prices to stabilise

Rising too much and too fast? Not any more, it seems.

The prices of new private homes are expected to stabilise – and remain firm – this year, said analysts.

This is thanks to new measures which kicked in yesterday to cool the property market.

The two rules: Lending institutions can lend only up to 80 per cent of the value of the property, not 90 per cent; and a new stamp duty of around 3 per cent for those who sell the property within a year of buying it.

These moves could dampen sentiment temporarily as buyers pause and take stock, said Credo Real Estate managing director Karamjit Singh.

Ms Tay Huey Ying, director of research and advisory at real estate consultancy Colliers International, expects the measures to curb the buying frenzy.

Prices will stabilise instead of soaring like they did in the third quarter of last year, she added.

Then, private home prices spiked 15.8 per cent (from the second quarter) and 7.4 per cent in the fourth quarter (from the previous one), according to the Urban Redevelopment Authority.

Mr Singh expects the new measures to affect only a small proportion of buyers – those with a ’short-term view of their investments’.

‘On the whole, demand for private homes, especially at the low end, is still expected to remain strong. Hence, prices may continue to firm up this year,’ he added.

Similarly, Ms Tay said prices are likely to ’stand firm’.

The new financing rules are not expected to hurt genuine buyers, said analysts, because banks were conservative and not prone to doling out loans of 90 per cent anyway.

But some Housing Board upgraders may feel the pinch.

Dennis Wee Group’s associate director Elvin Tan said two out of 10 clients were getting loans close to the maximum allowed before – 90 per cent.

‘Now that they have to fork out at least 20 per cent of the price of a private property, they will suddenly feel strapped for cash,’ he said.

Commenting on the new stamp duty for sellers, analysts said fly-by-night speculators will be weeded out.

They said these speculators – who tend to ‘flip’ a property less than a year after buying it for quick profits – make up 10 per cent to 20 per cent of all new private home buyers today.

The latest move by the Government came swiftly after last month’s sharp rebound in new private home sales.

Developers sold 1,476 units, triple the 481 sold in December last year.

‘Although speculative activity has not reached a level deemed excessive, there is a likelihood that its volume may rise in tandem with improved confidence and economic conditions,’ Ms Tay said.

With the new measures in place, she expects private home prices to rise moderately by 10 per cent to 12 per cent this year.

What buyers say

The Sunday Times visited 10 showflats, including The Shore Residences in Katong, Altez in Tanjong Pagar and Meadows@Peirce in Upper Thomson, yesterday.

Mr Nick Chong, 43
Chief operating officer

‘The stamp duty will have a larger impact on speculators, but if the market has a good growth rate, they’ll do well regardless of the new rules. The rules will probably affect the middle-income speculators, those who have to borrow money to speculate, and not the richer ones.’

Mr William Shie, early 40s
Sales manager

‘It won’t affect people who need a house. I actually welcome the new ruling; the lower the maximum possible loan, the better, because it chases away speculators.’

Ms Doris Teo, 59

‘I don’t want to borrow too much from the bank, and I definitely wouldn’t get a loan of as much as 80 per cent. The news just came out so I’m still unsure of how it would affect me. But it’s possible that I might have to find a flat in a cheaper location.’

Ms Elaine Lek, 31
HR executive

‘If I see a place and have a good feeling about it, even with the new bank limit, I’ll still figure out a way to buy the unit.’

Mr Sean Toh, 38
IT professional

‘I think the new measures will affect only those who are looking for condos as an investment; it won’t affect home buyers like me. I will be selling my condo in Yishun and we will use the money from that to buy a new one.’

Source: Sunday Times, 21 Feb 2010

No comments:

Post a Comment