Singapore’s jump in private home sales last month was only a temporary reprieve for developers as the government’s cooling measures take root and mortgage rates begin to rise.
The city’s housing sales climbed 54 percent to 742 in August from July, when they fell to 482, the lowest in almost four years, according to government data. With nine rounds of cooling measures since mid-2009, the increase will be short-lived, according to Mizuho Bank Ltd. and UOB Kay Hian Pte. Monthly sales averaged about 1,700 units in the first six months of the year.
A man cycles past CapitaLand Ltd.’s The Wharf Residence in Singapore. CapitaLand said July 25 it expects prices and sales of residential properties to moderate. Photographer: Munshi Ahmed/Bloomberg
CapitaLand Ltd.’s The Orchard Residences, center, stands in Singapore. Photographer: Munshi Ahmed/Bloomberg
“There have been successive rounds of measures coming through and with mortgage rates also beginning to move up, you will find that buyers are becoming more circumspect and wondering if these are the right entry levels,” said Vishnu Varathan, a Singapore-based economist at Mizuho, who forecasthome prices to fall 10 percent to 15 percent by 2016.
Singapore unveiled new rules in June governing how financial institutions grant property loans to individuals. Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a more than four-year campaign to curb speculation in Asia’s second-most expensive housing market, according to a Knight Frank LLP and Citi Private Bank report.
The new loan framework requires that lenders take a borrower’s debt into consideration when granting property loans, the Monetary Authority of Singapore said June 28. Home loans should not exceed a total debt-servicing ratio of 60 percent and those that do will be considered imprudent, it said.
“Normalizing interest rates” will pose significant financial risks to individual borrowers and the economy, the Ministry of National Development said on its website in response to questions in parliament yesterday. The property curbs are needed to avoid a “major price correction,” it said.
Higher Rates
Singapore’s home lending rates have risen about 0.5 percentage points in the past year, according to Keff Hui, a director at Mortgage Supermart Singapore, a mortgage broker.
Executive condominiums made up almost half of the homes sold in August, an unprecedented level, according to SLP International Property Consultants. Including these apartments, offered with some restrictions such as a monthly household income cap of S$12,000 ($9,523), August sales were 1,468, according to the government data.
“The bulk of the sales in August was on the executive condo side, not on private sales, which shows demand for private home sales is still low,” said Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian, who expects the number of residential properties sold to drop 30 percent in the next 12 months and as much as a 10 percent decline in prices. “The measures are having their impact.”
Record Prices
Among the developers that began sales of projects in August was Wing Tai Holdings Ltd. (WINGT), which marketed its condominium in the Tampines area, an eastern suburb of Singapore. It sold 218 units of 337 marketed last month, according to the data. RV Residences, offered by Allgreen Properties Ltd., in the central district sold 39 of 83 units marketed, the data showed.
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