SINGAPORE Oct 1 Singapore home prices softened
in the third quarter, with some analysts predicting further
declines in prices of government-built Housing and Development
Board (HDB) apartments as recent credit restrictions on home
buyers began to hurt demand.
Governments in the region have been trying to cool bubbly
housing markets with limited success due to the low interest
rates environment brought about by quantitative easing in
In Australia, for example, home prices in major cities
jumped to a record high in September, according to property
consultant RP Data-Rismark, while new rules went into effect in
New Zealand on Tuesday to limit risky home lending.
According to flash estimates released on Tuesday, resale
prices of HDB apartments in Singapore fell for the first time in
over four years, with the index dipping 0.7 percent in the
July-September quarter from the preceding three months.
HDB apartments house around 80 percent of Singapore's 5.4
The Urban Redevelopment Authority's index of private home
prices edged 0.4 percent higher in the third quarter from the
second as prices of homes in outlying areas rose. But prices of
apartments in the core central region fell 0.5 percent while
prices in the rest of the central region dropped 1.1 percent --
the first decline in one-and-a-half years.
Analysts attributed the weakness in third quarter home
prices to measures introduced between late June and August this
year that capped the amount of loans that can be extended to the
borrowers' income. While private home prices could hold at
current levels, HDB resale prices are likely to fall in coming
"The reduction of the mortgage servicing ratio to 30 percent
of a borrower's gross monthly income has taken its full effect
on resale prices," said PropNex Realty CEO Mohamed Ismail.
Previously, HDB buyers could use up to 35 percent of their
monthly income to service their housing loan.
Other factors affecting demand for resale HDB apartments
include the greater availability of new units as well as new
restrictions on HDB purchases by foreigners with permanent
"Moving into 2014, the HDB resale market can expect negative
price growth possibly at the range of negative 3 to 5 percent,"
Chia Siew Chuin, director of research and advisory at
Colliers International in Singapore, said that while cheaper
mass-market homes outside the central region continue to attract
buyers, overall affordability has been affected by the
government's cooling measures.
"Consequently, some developers have responded by fine-tuning
selling prices," she said.
Buying interest in Singapore private homes weakened sharply
in July after the central bank introduced rules to ensure that
monthly mortgage payments do not exceed 60 percent of buyers'
combined incomes, prompting companies such as City Developments
Ltd and CapitaLand Ltd to offer discounts on
Capital Economics, in a report earlier this week, said many
Asian economies have seen sharp increases in home prices, and
that prices in Hong Kong, Taiwan and Singapore had grown much
faster than incomes.
While price gains in Singapore have slowed in recent
quarters thanks to the aggressive macroprudential measures by
authorities in the city-state, they continue to rise by an
double-digit, annualised pace in both Hong Kong and Taiwan.
"Relative to incomes, property prices in Hong Kong now look
as overvalued as they did before the crash of 1997, when prices
fell by nearly 70 percent peak to trough," it said.
Taiwan's central bank warned mortgage borrowers last week to
watch out for risks if interest rates change.
(Reporting by Kevin Lim; Editing by Kim Coghill)