Singapore home sales fell to a four-year low and the central bank said the nation’s property market is stabilizing.
Annual home sales dropped 33 percent to 15,301 units in 2013, according to government data released today. New housing loans have declined and household balance sheets are strong, the Monetary Authority of Singapore wrote in an e-mailed statement to Bloomberg News today after a Forbes article this week said the city is headed for an “Iceland-style meltdown.”
Singapore unveiled new rules last year governing how financial institutions grant property loans to individuals, in addition to previous curbs including new taxes and higher downpayments. Fourth-quarter home prices slid for the first time in almost two years, trimming annual gains to the smallest since 2008 as mortgage curbs cooled prices in Asia’s second-most expensive housing market.
“The government and MAS have taken decisive steps to cool property demand and prevent excessive leverage,” the central bank said. “Singapore’s banks are resilient, with strong financial and capital positions.”
Singapore’s home sales plunged 82 percent to 259 units in December from a year ago, the lowest since January 2009. Developers marketed 118 units last month, the least since the Authority started compiling data in June 2007.
“The measures have impacted sales last year especially after the loan curbs in June,” said Lay Keng Lee, head of Singapore research at DTZ. “We don’t see a rollback of the measures yet as it is too early for that, so sales may decline to between 12,000 and 15,000 units this year.”
Iceland’s economy was pushed into recession when its three largest banks defaulted on $85 billion within weeks of each other in October 2008. The meltdown forced the government to seek a bailout from the International Monetary Fund and implement capital controls.
“The central bank here has been more wary of excessive lending since the 1998 financial crisis,” said Song Seng Wun, an economist at CIMB Group Holdings Bhd. in Singapore. “The risk of Singapore heading in the direction of Iceland is extremely unlikely and there are enough analysts from reputable investment banks and credit-rating agencies on the ground here to flag that if such a risk were to emerge.”
The city-state’s private residential property price index fell 0.8 percent to 214.5 points in the three months ended Dec. 31, after it added 0.4 percent in the third quarter, according to preliminary figures released by the Urban Redevelopment Authority earlier this month.
The index drop was the first since the January-to-March quarter of 2012. Prices increased 1.2 percent in 2013, lower than the 2.8 percent gain in 2012, data showed. That’s the smallest annual increase since prices slid 4.7 percent in 2008, the data showed.
The stock index tracking 50 property-related companies in the city rose 0.5 percent at the close of trading in Singapore. The gauge fell about 10 percent last year, compared with a 48 percent increase in 2012.
Developers are beginning to cut prices in existing and new projects and take lower profit margins, City Developments Ltd., Singapore’s second-largest developer, said on Nov. 12.
A new loan framework announced by the central bank in June required lenders to take a borrower’s debt into consideration when granting mortgages. Home loans should not lead to a borrower’s total debt-servicing ratio rising above 60 percent and those that do will be considered imprudent, the monetary authority said in June.
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