FOR IMMEDIATE RELEASE (25 April 2011)
Mass market leads private property growth
The 1Q11 private property results released by URA today clearly reflect the accumulated effects of the cooling measures announced by the Government on 30 August 2010 and 13 January 2011. Not only did the overall growth for private residential properties dip to 2.2% Q-on-Q, down from 2.7% the previous quarter, but the growth was most evident in the Outside Central Region (OCR), which grew at 3.1%, as compared to 2.0% for the Rest of Central Region (RCR) and 1.1% for the Core Central Region (CCR).
“The cooling measures announced by the Government were meant to encourage financial prudence and stamp out short-term speculative investing which would have unsustainably inflated private property prices,” recalls PropNex CEO Mr Mohamed Ismail. He refers to the reduced Loan-To-Value (LTV) ratio on additional mortgages to just 60% and the increased Seller’s Stamp Duty (SSD) of up to 16% introduced by the Government in January to further cool the property market.
“As a result of the measures, more home purchases now are made by genuine homeowners or investors with a mid- to long-term view,” he says.
Investors Look To OCR and RCR Due To Lower LTV
“The investors,” he elaborates, “are also shying away from the CCR and looking to the OCR and RCR for their property investments, probably to reduce the loan quantum for their property investment.”
To support this fact, he points out that the CCR experienced the largest drop in resale and new sale transactions Q-on-Q in 1Q11, as compared to the RCR and OCR. The RCR even experienced a Q-on-Q increase for new sales, further substantiating the migration of investors from the CCR to RCR market.
Reduced Transactions Due to Increasing Prices, Especially In OCR
While the overall 20.4% drop in the number of transactions Q-on-Q to 7,336 for the whole of Singapore can be attributed to the continued rise in prices, the drop in transaction for the mass market or OCR may have been partly due to the increase in mass market prices per square foot, leading to some resistance from mass market buyers. Mr Ismail surmises that many potential consumers may have been put off by some of the high prices of mass market projects of late, a few of which breached the $1,000psf mark.
He further details the decline could also be attributed to HDB upgraders who may have been priced out of the mass market due to the lower LTV.
Mr Ismail expects the private property price index to increase by 8% for 2011, with the OCR leading the way with 10% growth and the RCR and CCR price indices increasing by 8% and 3% respectively.
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