Local home prices feared to plunge by up to 15% until 2017

Sales are likely to stay subdued, as well.

Private residential prices are feared to dip by 5% to 15% over 2016 to 2017, according to a report by OCBC. Further, primary residential sales next year are seen to stay subdued at between 6 to 9k units.

OCBC also sees residential rentals levels tumbling 8 to 15%, and vacancy levels spiking from the current 7.8% to about 10% by end-2017.

Given the high price elasticity of demand in the housing marking, however, a price crash of 20% is improbable—significant buyer demand will likely come into the market’s lower price points.

For 2016 to 2017, Singapore home prices will likely be driven by sustained oversupply, rising floating mortgage rates, and possible curbs reversals.

The report asserts that the current significant physical oversupply situation is likely to persist in the coming year, and that it will impact rental levels and vacancy rates.

Also, floating mortgage rates—typically pegged to short-end SIBOR or SOR—are likely to surge in line with higher US interest rates, and this will add pressure on rental carry and housing affordability.

On the other hand, there remains a potential for curbs reversals after price pullbacks reach double-digits in the latter half of 2016 and after.

“However, we believe these will only soften the magnitude of price declines and are unlikely to reverse the general bear market trend,” stated OCBC.