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Home prices could slip with oversupply expected: Kwek

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Kwek Leng Beng, executive chairman of City Developments, says that unless the global and domestic economies rebound strongly and curbs on foreign buyers for private residential property sales are reviewed, the group expects some oversupply in the Singapore residential sector from next year onwards.

"The group would rather err on the side of caution in its land replenishment strategy," CDL said.
Generally, private home prices could drop like 5 per cent from now till next year assuming all the cooling measures remain intact, he said during the group's second quarter results briefing.

"I don't believe for a moment the market will collapse, but I believe it can go down. I believe the government is astute enough that by 2015 or thereabouts, it may possibly remove some of the (cooling) measures - because 90.2 per cent of Singaporeans own property and it is not their intention to crash the market."

Rather, the authorities' goal is "not to allow prices to keep on going up and up all the time. I think that's good".

Mr Kwek also said that the group expects "stronger headwinds" in the second half of this year with the latest round of cooling measures, referring to the implementation of the Total Debt Servicing Ratio (TDSR) framework effective June 29.

He reckons that interest rates in the region will not go up soon as that will be at the expense of economic recovery. That said, he acknowledged that "transaction volume for private residential sales is beginning to be more measured and prices in general are expected to be moderated for the mass-market segment, due to the tightening of bank borrowings".

Buyer psychology far outweighs supply and demand fundamentals, he stressed. "My observation is that as property prices move upwards, more people want to buy in. Conversely, as prices start declining, people become fearful and cautious in buying property. This 'herd instinct' may distort market perception and all industry stakeholders should consider this paramount factor in their decision making."

In its results statement, CDL noted that investment sentiment, particularly among foreign buyers in Singapore's high-end residential segment, has not recovered due to the punitive additional buyer's stamp duty which the authorities have said is a temporary cooling measure.

"So the sophisticated (foreign) investors have patience to wait and in the meantime, have gone to London, New York, Paris," said Mr Kwek. Compared to some of the prices being achieved in overseas markets, prices here are "peanuts", added Mr Kwek.

In the mass market, buying interest has remained healthy due to abundant liquidity in the market and low interest rates, though the latest TDSR framework has made borrowing more difficult, the group said.

Commenting on the recent high bids for EC sites, the group said this reflects the limited land bank that developers have and the high liquidity in the market. "The EC segment is the least affected by the cooling measures as it is specially catered to a select group of eligible genuine home buyers with pent-up demand," said the group.

Credit from Business Times - 7 August 2013
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