Singapore Curbs to Slash Home Sales in 2013: Southeast Asia

Singapore Curbs to Slash Home Sales in 2013
Singapore home prices climbed to a record in the third quarter, prompting Finance Minister Tharman Shanmugaratnam to say last month that the real estate market may get “bubbly.” Photographer: Munshi Ahmed/Bloomberg

Singapore home sales may fall as much as 27 percent in 2013 after climbing to a record this year as six rounds of housing curbs by the government crimps demand, according to Jones Lang LaSalle Inc.

Private home sales next year may drop to 16,000 units from 22,000 units this year, said David Neubronner, the head of the property brokerage’s Singapore residential business. The island state introduced measures including higher down-payments for second home purchases and new taxes for foreign buyers since the start of 2010, he said.

“Like a boxer who gets punched too many times, every measure will chip away at the market,” Neubronner said in an interview yesterday. “This has been a stellar year, an exceptional year. I don’t think after six rounds of measures, the market can escape.”

Singapore home prices climbed to a record in the third quarter, prompting Finance Minister Tharman Shanmugaratnam to say last month that the real estate market may get “bubbly.” The government won’t allow home prices to outstrip gains in incomes, he said.

The Monetary Authority of Singapore or the central bank told banks on Oct. 5 to restrict home-loan maturities “to curb continued upward pressure on residential property prices,” in its latest attempt to avert a housing bubble. The government said in September it plans to cap the number of homes that can be developed in suburban projects as it seeks to curb the increasing trend of so-called shoebox apartments.

More Curbs

In December last year, the government imposed an additional stamp duty on foreigners and corporations buying property, and additional levies on permanent residents buying a second home and citizens purchasing a third residential property.

City Developments Ltd., Singapore’s second-biggest developer controlled by billionaire Kwek Leng Beng, said yesterday it “hopes” the government will lift the housing curbs.

“While the outlook for the property market in the medium to long-term is still positive, the group is cognizant that between 2014 and 2015, there could be some oversupply with more residential units being completed,” the company said in its earnings statement. “However, this fear will be unwarranted if the world economy turns around by that time.”

The Singapore economy is forecast by the government to expand 1.5 percent to 2.5 percent in 2012, from 4.9 percent in 2011. The economy “slowed discernibly” in the past two quarters and will grow at below-potential levels for a second year in 2013, the Monetary Authority said Oct. 30.

Sales Drop

Private home sales fell 26 percent in October from the previous month, when sales jumped to the highest in more than three years, according to data released by the Urban Redevelopment Authority today.

Singapore’s property index, tracking 40 property-related companies, fell 1.5 percent, the most since July 9.

Still, home prices will remain little changed next year, Neubronner said. The luxury home market will be affected by Europe’s debt crisis, he said. Prices in the so-called mass market, usually located in the suburbs, have reached a certain affordability level, he said.

The island-state’s private residential property price index rose 0.6 percent to a record 208.2 points in the three months ended Sept. 30, according to government data. In prime districts, apartment prices gained 0.2 percent, compared with the 1 percent increase in the suburbs.

‘Saturation Point’

“Luxury home prices are near their bottom, still prices won’t go up yet as Europe isn’t doing well,” Neubronner said. “The gap is closing between the mid-market and luxury so the smart money will go back to luxury next year. The mass market segment has edged above the affordability level so it won’t go up more.”

Home sales reached 17,900 units in the first nine months this year, according to government data. Neubronner estimates about 20 percent were so-called “shoe-box” units, or homes smaller than 50 square meters (538 square feet) in size. There is demand for homes selling at lower than S$1.5 million ($1.2 million), he said.

Knight Frank Pte, a property consulting company, also estimates home sales will fall to between 16,000 and 18,000 next year.

“I don’t think crossing 20,000 units a year is sustainable,” Png Poh Soon, director of valuation and head of consultancy and research at Knight Frank in Singapore, said in an interview yesterday. “Going forward, there is going to be a tapering of demand, a saturation point.”

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