Singapore home sales slide to lowest level since December 2009

Buyers react to the imposition of curbs on property loans with fewer projects on market

PUBLISHED : Wednesday, 21 August, 2013, 12:00am
UPDATED : Wednesday, 21 August, 2013, 3:10am

Singapore's home sales in July slid to the lowest since December 2009 as investors balked at new curbs on property loans and developers marketed fewer projects.

Home sales fell to 481 units last month, 73 per cent lower than a month earlier, according to data from the Urban Redevelopment Authority. Sales rose to a record 2,793 units in March.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four- year campaign in January to curb speculation in Asia's second-most-expensive housing market. Singapore in June also unveiled new rules governing how financial institutions grant property loans to individuals.

"Prospective homebuyers are exercising caution in their capital outlay before they make the property purchase," Alice Tan, head of consultancy and research at Knight Frank said in an e-mail. "New sales volume is likely to stay low in August 2013 at around 500 to 700 units."

A new framework requires that lenders take a borrower's debt into consideration when granting property loans, the Monetary Authority of Singapore said on June 28. Home loans should not exceed a total debt-servicing ratio of 60 per cent and those that do would be considered "imprudent," it said.

The island-state's private residential property price index rose 1 per cent to 215.4 points in the three months ending June 30, extending a 0.6 per cent increase in the first quarter. Suburban home prices climbed 3.8 per cent in the June quarter, compared with the 1.4 per cent increase in the previous quarter, according to government data.

Home sales reached 22,699 units in 2012, based on the government data that dates back to 1996.

Singapore also plans to raise taxes for luxury homeowners and residential properties that are rented out. The higher tax will apply to the top 1 per cent of homeowners who live in their own residences, or 12,000 properties.

The government tightened loan-to-value limits for buyers seeking a second mortgage. The cash down payment would rise to 25 per cent from 10 per cent starting from the second loan, it said.

"The lower sales are due to the shock of the new loan rules," said Nicholas Mak, executive director at SLP International Property Consultants in Singapore. "That coupled with slower loan processing by banks to enforce new rules resulted in fewer launches by developers."

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

Home prices moderated "significantly" after several rounds of cooling measures by the government, the Ministry of National Development said on August 13 in a statement on its website in response to lawmakers' queries.