Friday, January 28, 2011

Home sales: Volume to fall, not prices

HOME sales are expected to drop in the wake of the Government's recent cooling measures, although prices should hold up fairly well, according to a new report.

But DTZ Research pointed out that the substantial supply of new housing in the pipeline could outstrip demand in the next few years, leading to prices and rentals coming under pressure.

It also flagged the challenges posed by sluggish Western economies and the possibility of more cooling measures.

The property consultancy's report was focused partly on the possible effects of cooling measures introduced on Jan 13.

It tipped that sales volume would fall as short-term speculators would be weeded out of the market by the hefty seller's stamp duty of up to 16 per cent for homes sold within a year of purchase.

But not all investors will withdraw. Some may find the 4 per cent seller's stamp duty on homes sold in their fourth year of purchase to be surmountable.

They could shift their focus to buying unfinished units with completion dates three to four years ahead.

Prices this year are expected to be largely stable with a decline of not more than 5 per cent, said Ms Chua Chor Hoon, DTZ's research head for South-east Asia and one of the report's authors.

'(Prices are) underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar, and the inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong,' she added.

Landed homes, small units and high-end apartments are expected to be less affected by the measures.

Said DTZ executive director (residential) Margaret Thean: 'Small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units.'

She also said the seller's stamp duty will have little impact on landed homes as most are purchased for owner-occupation, while high-end apartments will continue to attract foreign interest.

Other challenges come in the form of a potential oversupply.

A spike in completed units is expected in the next two to three years, with the Government putting out a record number of homes through public housing and land sales programmes.

'There is also uncertainty over the strength of recovery of the major Western economies. If they recover well, interest rates will move up and reduce the affordability of mortgage payments,' the report added.

'On the other hand, if they continue to languish, this will have an effect on the Singapore economy and optimism in the property market eventually.'

With the residential market facing numerous challenges, investors are likely to identify opportunities in other property sectors and alternative investment products, DTZ said.

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