The MAS had just announced that recent en bloc deals could “pose risks to sustainable conditions” in property market. In layman’s speak, it means “we’re taking steps to make sure you’re not going to get rich quick”.
The MAS had asked developers, potential buyers and lenders to “proceed cautiously” with a medium-term view of the market’s supply/demand dynamics. One could read this as a hint that regulators would interfere with the free market if a need for it arises.
Singapore’s central bank said that 20 residential projects (about 2900 homes) have been sold in 2017 through en bloc transactions. The volume was contributed by developers seeking to replenish their land banks.
This means that in the medium term of three to five years, en bloc and government land sales sites would both contribute to an increase in private housing stock. However, with slower population growth, there would be great uncertainty as to whether existing vacancies can be fully absorbed by the market.
If there is insufficient demand from rentals and home buyers, prices and rentals would come down in the medium term.
Buyers today should be prudent and factor in potential increases to their debt servicing burdens should interest rates rise and rentals fall. Banks should continue being prudent and ensure property appraisals remain realistic.
Private home prices have increased recently. Rates have increased by 0.7% in the third quarter after a gradual decline over 15 consecutive quarters. Buyer sentiment had also improved. The total number of transactions have rose 54% in 2017 compared to the same period last year.