Private home prices may fall 5%: DTZ

PRIVATE home prices in 2011 could fall by up to 5 per cent but will be largely stable, says a new report by DTZ Research.

The firm expects recent government cooling measures to reduce sales volume, but not cause a significant fall in prices.

Sales volume is expected to fall as short-term speculators will be weeded out by the hefty seller's stamp duty (SSD) of up to 16 per cent within the first year of purchase. However, not all investors will withdraw from the market as some may find the 4 per cent SSD by the fourth year of sale to be surmountable. They could shift their focus to buying uncompleted units with completion dates three to four years later, said DTZ.

The property consultancy expects prices this year to be underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar and inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong.

In particular, landed homes, small apartments and high-end apartments will be be less affected by the measures, said DTZ's executive director for residential, Margaret Thean.

'Small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units. The four-year seller's stamp duty will have little impact on landed homes as most purchase them for long-term owner-occupation. And high-end apartments will continue to see foreign interest,' Ms Thean said.

But DTZ does not rule out the possibility of more government measures should demand remain at a high level after a period of cooling off.

The report also noted other challenges in the form of a spike in the number of completed units in a few years' time as the government is releasing a record high number of homes through the public housing and government land sales programmes. There is also uncertainty over the strength of recovery of the major western economies. If they recover well, interest rates will increase and reduce the affordability of mortgage payments. On the other hand, if they continue to languish, sentiment in Singapore's property market could eventually be hit.

Published January 28, 2011

By UMA SHANKARI

Source: www.businesstimes.com.sg