Impact on TDSR and MSR

[SINGAPORE] Coming on the heels of a dramatic year peppered with policies aimed at cooling the property market and a number of firsts in public housing, 2014 appears poised to be a more subdued year by comparison.

Consultants say it is unlikely that the government will roll out any new policies next year, even though they do not rule out some tweaking of existing measures.

"Policy changes, if any, may most likely be of the 'unwinding' kind - that is, rolling back earlier policies," said Chua Yang Liang, head of research, South-east Asia, at Jones Lang LaSalle. "The timing will depend very much on the pace of economic growth and the response from the property market during the period. We reckon a healthy long-term growth rate of 1-2 per cent a quarter on the Property Price Index is what the state is comfortable with."

Chia Siew Chuin, Colliers International's director of research and advisory, does not expect new measures to be introduced, given that the ramifications of existing measures are still being felt in the various segments.

The most significant event this year was the implementation of the total debt servicing ratio (TDSR) framework, whose impact cut across the private residential, as well as the strata-titled retail, office and industrial sectors, she noted.

The TDSR, which came into effect on June 29, required that lenders consider a borrower's total debt obligations (including other mortgages and loans for cars) before granting a new home loan. The total debt obligations ceiling was set at 60 per cent of a buyer's gross monthly income.

This followed the seventh round of cooling measures, announced in January, which included lower loan-to-value limits, higher cash downpayments, size curbs on EC (executive condominium) developments, and anti-speculation moves targeted at the industrial sector. Notably, a seller's stamp duty was imposed on the industrial sector for the first time.

Given the two rounds of measures, Ms Chia described 2013 as a "a tale of two halves". The implementation of the TDSR, she said, marked a turning point for the healthy level of sales for strata-titled, non-residential properties which was seen in the first half of the year.

"To date, TDSR appears to have had the most far-reaching impact on property compared with the previous property-specific measures. Overall, residential prices will end about 2 per cent higher from a year ago and flat over the last quarter. For the most part, developers have been able to hold onto current prices for luxury projects but may be pressured to adjust prices to a competitive level with more projects receiving their Temporary Occupation Permits (TOP) next year," said Joseph Tan, executive director, residential, at CBRE.

On the public housing front, the mortgage servicing ratio (MSR) of 30 per cent curbed demand as buyers were no longer able to afford to upgrade to larger flats with smaller loans.

This has helped stabilise the HDB resale market, noted Eugene Lim, key executive officer of ERA Realty. In addition, cash over valuation (COV) has continued to fall, with more flats changing hands with no COV or below valuation, he said.

"HDB resale transactions are likely to remain low for now, but we are hopeful of volumes increasing after the festive period as more buyers come back into the resale market, attracted by the prospects of being able to pick up a property at or below valuation, particularly in the non-mature estates," said Mr Lim.

Mohamed Ismail, chief executive officer at Propnex Realty, has a more conservative outlook for the HDB resale market.

With demand sapped by the release of new Build-To-Order (BTO) flats - 77,000 BTO flats were launched in the past three years to quell the voracious demand for homes - the resale market is effectively serving only the upgraders and permanent residents who have attained three- year status now, he noted.

This, combined with the various rounds of property measures aimed at keeping price growth sustainable, will create a "balancing effect" in the resale market, gradually softening price growth to a more sustainable level.

This year, he expects HDB flat prices to dip one per cent. By end-2014, flat prices are expected to fall by up to 5 per cent as a result of the falling prices of all HDB flats when the 77,000 new flats come on stream, he added.

Against this backdrop of multi-pronged approaches to stabilise the market, a number of significant announcements that are expected to have a major long-term positive impact were also unveiled this year.

These included the freeing up of some 800 hectares of land with the moving of Paya Lebar airbase to Changi, and the unveiling of plans for new housing areas, such as Bidadari, Tampines North, and Punggol Matilda.

The government has also tried to meet the various housing needs of different groups after satisfying the needs of first-time married couples. Its initiatives include the unprecedented move of allowing eligible singles to buy new two-room HDB flats in non-mature estates, and the pilot launch of Three-Generation (3Gen) flats catering to multi-generation families, which was warmly received.

November marked the rolling out of a record 8,952 flats, the largest joint BTO and sale of balance flats exercise.

With such laudable moves in the public-housing space, Colliers' Ms Chia said she looks forward to equally "incisive and targeted initiatives" in the industrial and commercial sectors.

What is needed is a more intentional and detailed approach to addressing the different types of business requirements in the industrial and commercial property sectors. This means that the eventual building must meet end-users' needs without ambiguity, said Ms Chia.

"Should there be a mismatch between the type of real estate formats and the real needs of users, planning efforts will be futile and scarce resources will be wasted," she said.

Looking ahead into 2014, the retirement housing sector will be worth keeping an eye on, given Singapore's demographic trends and ageing population, said Lee Lay Keng, head of Singapore research at DTZ.

"It'll be interesting to see what the take-up will be for the retirement village at Jalan Jurong Kechil that is currently being planned by World Class Land. We could see more of such developments going forward if the project attracts strong buyer interest," she said.

Elsewhere, Knight Frank Singapore's research head, Alice Tan, said that assuming global economic growth improves, she expects the office sector to make a comeback in 2014 with greater interest from investors and space users.

"The positive prospects of improving occupancy and rentals with more businesses choosing to set up their operations in Singapore, combined with an improving global market outlook, would provide a boost to the office sector," she said.

Quieter year ahead

Source: Business Times 13th December 2013

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Impact on TDSR and MSR

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