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Peggy Sito

A 'hazy' outlook is expected for the Singapore residential market in the next three to six months, after changes in the state-run pension scheme,  according to property consultants.

The new scheme,  announced last month, was likely to dampen the interest of prospective home buyers  as they digested  the news and worked out the sums,  according to Knight Frank.

'Prices will probably be listless as the market comes to terms with the Central Provident Fund (CPF) changes,' the consultant said.

Last month the Singapore government announced that CPF contribution rates would be cut from 36 per cent to 33 per cent from October 1 this year.

The monthly CPF salary ceiling will also be adjusted down in three steps from S$5,500 (HK$24,699) from January 1 next year,  to  $5,000 by 2005 and to  $4,500 by 2006.

The overhaul to the 48-year-old S$100 billion pension scheme, which many residents use to fund mortgages, was expected to add pressure  to the country's home sector which has already been hit by  excessive supply amid a slowing economy.

According to Chesterton International, residential property prices fell 0.6 per cent quarter on quarter or 1.4 per cent year on year.

However,  sales activity rose  in the second quarter after the Sars outbreak  was contained in  May.

Developers sold 1,917 homes in the second quarter, up from 427 in the first quarter.

Resale volume also rose from 833 to 1,301 deals, according to Chesterton Petty, the Hong Kong arm of Chesterton International.

Frank Knight  said the proposed changes could reduce demand for private homes.

During the quarter, the Housing and Development Board recently  relaxed the subletting rules to allow  owners who have lived in their flats for at least 15 years to sublet the entire property.

The board also raised the household income ceiling for renting flats under the board's public rental scheme from S$800 to  $1,500 per month.

The introduction of these measures are believed to be aimed at assisting Singaporeans to cope with the CPF changes as the amended pension scheme could  impact  buyers' purchasing power.

However, Knight Frank said such measures  increase the supply of rental apartments  in the property market and was 'likely to exert downward pressure on the rentals of  Housing and Development Board flats and private  property'.

Chesterton International said overall rentals are expected to fall 3 per cent to 5 per cent this year.

The Housing Development Board  resale market was also likely to be less active in the next 12 months. Three-  and four-bedroom flats will remain the main segment of demand, according to Knight Frank.



Changes to Singapore's pension fund may dampen home buying