Residential property prices are expected to ease in the fourth quarter, but they are unlikely to fall in the next 12 months, according to Donald Han, Special Adviser at HSR Property Group in a Business Times report.
Prices of resale HDB flats could rise 0.5 percent this quarter, while non-landed home prices could inch up by zero to 0.5 percent in the same period.
Han added that before the latest cooling measures were announced, HDB resale prices were expected to go up two to 2.5 percent, while prices of private non-landed homes were forecasted to rise 0.8 percent quarter-on-quarter.
With the market’s low interest rate environment and liquidity, prices will not likely drop anytime soon.
“We think the underlying support for the residential market is still the low interest rate environment, which will ensure market activity over the next 12 months. Prior to this, we would have expected the party to come to a standstill middle of next year, but (this has changed) with the US Federal Reserve pledging to maintain Fed funds rate near zero at least through 2015,” said Han.
The interest rate alone would “drive the market because the money has to be parked somewhere”.
Nonetheless, the latest set of property cooling measures, including a 35-year cap on loan tenures and tighter loan-to-value (LTV) ratios, could dampen sales.
The loan tenure restrictions will lead to higher monthly instalments; hence some buyers could be priced out of the market – although the number is negligible, Han said. However, greater impact will come from buyers who postpone their purchasing decisions, hoping for a market correction.
“People are probably going to wait at the sidelines to see what transpires,” added Han.
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