News Analysis: Singapore's residential property market likely to remain subdued as gov't cooling measures stay

While the prices and transaction levels of Singapore's residential property market have declined in the past few quarters, there is no sign to indicate that the downtrend is about to reverse, and analysts are divided over when the government will relax its cooling measures.

Private home prices in Singapore have fallen close to 7 percent since the third quarter of 2013. More developers offered pricing discounts of between 3 and 10 percent to move inventories, but take-up of units remained subdued at 20 percent to 40 percent, even in better locations. While new home sales rose 5 percent on- year to 5,602 units for the first eight months of this year, this number was largely driven by the mass market and mid-end segment, whereas the high-end property market still suffered from poor sales volume.

Analysts and market participants agreed that the cooling measures introduced by the government from 2009 to 2013 were the key factors behind the current weakness in Singapore's residential property market.

Nomura Research said Singapore's private home prices are expected to decline further in 2016, especially when more home- sellers who have been subjected to the seller stamp duty (SSD) restriction since 2011 would have fulfilled the holding period of four years by next year and could therefore be more willing to lower prices.

J.P. Morgan Research, for their part, also pointed out that government measures continue to dampen sentiment with stamp duties aggravating price mismatches between buyers and sellers. It forecast private home prices in Singapore would decline 6 percent this year and another 4 percent in 2016, with vacancies expected to rise from 7.8 percent in 2014 to 12 percent by the end of this year.

Given the current weakness and bleak outlook for local residential market, it came as no surprise for some developers to renew their calls for property cooling measures to be relaxed, especially now that the general election is over. But analysts were divided over the timing of the government's decision to lift the curbs.

Nomura believed after the Singapore electorate has already affirmed what the government has achieved in terms of improving housing affordability over the past four years in recent election, the government's focus could begin to shift from housing affordability to ensuring a soft landing for the housing market.

Therefore, the Singapore government could review some of the cooling measures for the housing market such as the additional buyer stamp duty and SSD by the time the budget for 2016 is announced next February.Nomura forecast with the likely relaxation of the cooling measures that lower transaction costs, transaction volume next year could pick up as some renters become buyers.

However, J.P. Morgan does not expect cooling measures to be relaxed anytime soon, as it is still premature to withdraw existing cooling measures given that residential prices have only fallen around 7 percent from a peak in third quarter of 2013. The American research house added that the prices of private home in Singapore are likely to decline at a gradual pace, since developers are unlikely to cut prices aggressively due to high land acquisition prices and strong balance sheets. Endi