Find out why it’s still too soon to relax Singapore’s property cooling measures

Prices have to fall by 10% first.

The sales drought will continue for Singapore’s residential developers, as the country’s stringent property cooling measures aren’t expected to ease anytime soon.

According to Barclays, the relaxation of property cooling measures would be premature, despite the continuous softening in property prices, even though year-to-date developer sales have declined 54% y/y.

Private home prices fell 1.0% q/q in 2Q14, the third straight quarter of decline, bringing the cumulative decline to 3.2% since the peak in 3Q13, but still 57% above 2Q09 levels. Resale public housing prices fell 1.4% q/q in 2Q14, the fourth straight quarter of decline, bringing the cumulative decline to 5.3% since the peak in 2Q13, but still 42% above 1Q09 levels.

“In the previous two cycles, the unwinding of tightening measures only started after the onset of a crisis and a significant fall in property prices (-16% in Nov-97, -13% from 2Q00 mini peak in Oct-01),” noted the report.

Here’s more from Barclays:

Nearly a year has passed since our projection of a downturn in the Singapore housing market. We revisit and update the year-to-date physical performance.

In a nutshell, we believe the Singapore housing market is unlikely to improve given our assumptions that 1) supply and an interest-rate hike are both becoming more imminent, and 2) the government is unlikely to relax property tightening measures before a significant decline in the property price index, which we forecast to be sometime in mid-2015. We also note the rising risk of unsold inventory, across both high to low-end segments.