More dialogue between the government and developers should be conducted as the slowing demand for property could damage the wider economy, said Chia Boon Kuah, president of the Real Estate Developers’ Association of Singapore (Redas).
“The fear is that when consumer sentiment declines too much as a result of measures designed to cool the market, there could be a broader impact on the economy,” he said at the annual Mid-Autumn Festival lunch recently.
Chia highlighted the growing supply of unsold units on the balance sheets of developers. He noted banks, which provides loans to homebuyers and developers, are increasingly concerned as well.
Notably, household balance sheets have been underpinned by high home prices and debt, revealed a recent UBS report, which also indicated that a 10 to 15 percent drop in prices could significantly affect consumer spending.
“This shows that even when a small segment of mortgages sours, it can have a negative impact on the broader market,” said Chia.
So far, figures from the Urban Redevelopment Authority (URA) showed condominium prices eased by 2.3 percent in 1H 2014, while prices of HDB resale flats dropped by three percent.
With this, Chia said Redas “stands ready” for more partnerships with the government in order to prevent a destabilising economic slowdown.
Nonetheless, Chestertons Managing Director Donald Han noted while developers may be affected by shrinking margins now, most have already amassed strong balance sheets during the robust property market over the last three years. Additionally, banks are in a stronger position now than during the global financial crisis.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
