Singapore, once an expensive and thriving real estate market, is now staring at a dismal residential housing scenario. A further decline in private residential prices in 2016 should prompt the government to take necessary steps to resolve this growing problem.
The government had started cooling the home property scene in 2009, to keep the prices under control, when demand grew in foreign markets and the interest rates fell - indications of an overheated market. It introduced residential property restrictions, which led to increased real estate taxes, higher stamp duties and a tighter debt repayment cost at 60% of the buyer's monthly income.
Channel NewsAsia reports show that with a 0.5% drop in residential prices in the three months ended December 31 from the previous quarter, the annual decline reached 3.7%, almost at par with the 4% drop in 2014 - the first year-on-year decline since 2008.
These government restrictions have naturally invited a lot of objections from the city developers, especially in the face of declining prices for 17 years running, with 2015 recording the lowest prices in the last seven years. The deterioration has been a rising concern for the builders for quite some time now, with the private apartments losing out on business because of the caps slammed by the government. City Developments Ltd., one of Singapore's leading builders, has now come forward and urged the government to lift the restrictions "as soon as possible".
According to Bloomberg, Nicholas Mak, an executive director at SLP International Property Consultants in Singapore says "The market is reaching the bottom. We will see less than 1 percent declines in the first two quarters of this year. Prices will continue to grind lower until there are changes in the macro economic environment or the government makes some tweaks to the property measures."
However, despite the concerns, it seems there are indications that these impositions will not be lifted in its entirety, just to appease the builders. But some tweaking and revisions might be under consideration. The Straits Times revealed that Mr. Ong from Jones Lang LaSalle says "The government has maintained that it is not yet time to ease the cooling measures and our sense is that it is more likely to be later rather than earlier in 2016."
In spite of the declining trend, Singapore still holds the spot for the second-largest residential housing market in Asia, after Hong Kong. As the prices are expected to go further down, the city builders are holding their breath to see what the government has in store for them this year.
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