For the first time in 13 years, both public and private housing prices lost ground for the full year in 2014 - and analysts expect even steeper price falls this year.
Cooling measures sent values of private properties down 1.1 per cent in the fourth quarter, taking the full-year slide to 4 per cent, the Urban Redevelopment Authority said yesterday.
Prices of HDB resale flats fell 1.5 per cent in the three months ended Dec 31, HDB data showed yesterday. For the full year, HDB resale prices sank 6 per cent.
This is the first time since 2001 that both public and private home prices have fallen over a full year.
The stagnating market is likely to worsen this year, analysts said, though not dramatically.
Since the third quarter of 2013, HDB resale flat prices have fallen more quickly than those of private homes. That is set to continue as a surging supply of new public flats and buyer curbs weigh on the market. The HDB's move to ramp up its building programme to meet demand from first-time buyers will flush the market with 16,900 Build-To-Order (BTO) flats this year, said HDB, after 22,455 were offered last year.
A mortgage servicing ratio, which limits monthly housing payments at 30 per cent of the buyer's gross monthly income, has hit many, while newly minted permanent residents can buy an HDB flat only after three years. "HDB sellers are more willing to compromise because of their weaker bargaining position as some may need to dispose of their flats before moving into their new homes," explained Dr Lee Nai Jia, head of research at DTZ Singapore. "Developers, in contrast, have enjoyed healthy profits from the previous years and are in no hurry to slash prices, lending support to the private market."
The private market faces a "perfect storm" of factors that point to further softening in prices.
An overhang of new home completions at 24,796 units this year looms over the market amid tightened immigration policies.
Vacancy rates at private homes rose to 7.8 per cent in the fourth quarter, up from 7.1 per cent in the preceding quarter - which in itself was a nine-year high. This was exacerbated by a sharp fall of 3 per cent in rentals in the last quarter over a 0.9 per cent increase in the preceding quarter.
Expectations are also high for the United States Federal Reserve to hike interest rates in the second half of the year, posing more risks to highly leveraged home owners in a flailing rental market.
"These headwinds are expected to persist through the year, amid uncertainty in the global economic arena," said Ms Chia Siew Chuin, director of research and advisory at Colliers International.
It is against this backdrop that buyers might decide to "wait and see" this year, said Ms Christine Li, research head at OrangeTee.
A Ministry of National Development spokesman said yesterday that "property market cooling measures are intended to keep the market stable and sustainable" and that the price decline over the past year has been "mild".
Market watchers have placed their bets on a slip of 5 to 8 per cent for both HDB and private home prices this year.
This article was first published on Jan 24, 2015.
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