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Likely fall in home prices a lure for bargain hunters

Likely fall in home prices a lure for bargain hunters.

Housing prices are set to come under considerable pressure this year as consumers concerned about a subdued economic environment and rising interest rates tighten their purse strings. But with analysts projecting a fourth consecutive year of price decline since the Total Debt Servicing Ratio (TDSR) framework was implemented in 2013, bargain hunters on the scout for cheap properties in good locations could help push transaction volume higher.

Analysts TODAY spoke to are projecting prices for private residential properties to decline by about 3 per cent this year. The decline — similar to the estimated fall in 2016 but far shy of the 60 per cent surge between 2009 and 2013’s peak — could draw potential buyers and push transactions higher for the third consecutive year.

Analysts are projecting that private home sales could range between 17,000 and 19,000 units this year, surpassing 2016’s projected three-year high of 15,000 to 17,000 units.

But even at the high end of the estimate, 2017’s home sales would still be only about half the nearly 38,000 units sold in 2012.

The fundamentals of the residential market have not improved, with GDP growth slowing in the coming quarters, a potential interest rate hike and increased volatility in the financial market. However, transaction volume could still inch up by a single digit from 2016 levels, barring external shocks.

Official data this week showed that Singapore’s economy grew 1.8 per cent last year, its weakest performance since 2009, when gross domestic product (GDP) contracted 0.6 per cent.

The Government has also indicated that it does not expect the economy to pick up significantly this year, with Prime Minister Lee Hsien Loong speaking of “difficult and uncertain times” in his New Year message.

At the same time, the United States Federal Reserve last month also raised its key rates target by 25 basis points to between 0.5 and 0.75 per cent, and projected another three rate hikes this year. With interest rates in Singapore expected to rise in tandem with US interest rates, repayments of loans will become more expensive, potentially affecting buying sentiment.

Adapted from: TODAY, 5 January 2017