Despite last year’s property cooling measures, Edmund Tie and Company expects residential property prices to remain relatively stable.
Prior to the latest cooling measures that were rolled out in 2018, the last time similar regulations were introduced was in 2013. To moderate the private residential property market, the Total Debt Servicing Ratio (TDSR) framework was introduced that year.
Although the measures led to a drop in sales and prices in 2014, the market began picking up again in the second quarter of 2017, with the momentum carried over to 2018.
With this, Darren Teo, head of research at Edmund Tie and Company, believes that residential property prices will remain firm even with the latest cooling measures in place.
This comes as most developers launching new projects this year had paid high prices for land during the en bloc fever that commenced at around May 2017, says Teo in his commentary on Channel News Asia.
Developers will also be more willing to maintain prices and accept a lower sell-down rate rather than resort to discounting, which may devalue the overall project as well as disappoint earlier buyers who forked out higher prices, Teo opines.
Some developers may be incentivised to resort to heavy discounting to sell all remaining units within five years of being awarded the land in order to recoup the remissible portions of developer’s Additional Buyer’s Stamp Duty (ABSD), which is sizable at 25 per cent (an increase from the previous 15 per cent). However, Teo shares that the number of developments that will reach the five-year deadline from now till 2020 is relatively low, with less than 200 units in total.
Instead of steep offering discounts, he expects developers to position their projects more competitively moving forward, especially in view of the large supply of properties in the pipeline.
Aside from early bird discounts, developers may offer higher sales commissions to agents as well as deferred payment arrangements for completed project in order to boost sales, Teo adds.
“Taken together, I expect potential downward pressure for the resale market of older, less well-located and well-amenitised estates due to stiff competition from new project launches,” he concludes.