Property prices might continue to drop even if cooling measures are lifted: report

High household debt will keep demand muted.

Developers are hoping that home prices will rebound once property cooling measures are lifted, but analysts at Citi warn that extremely high leverage will continue to keep a lid on buyer demand in Singapore.

Citi said that with household debt close to twice the average disposable income, buyers are less likely to invest in homes even if cooling measures are lifted.

Apart from high household debt, rising retrenchments may also eliminate debt-servicing capacity among affected homeowners, while rising vacancy rates will drive down rental yields, decreasing the attractiveness for investor buyers even without a rise in mortgage rates. 

Apart from these factors, recent measures to increase the income ceiling for the HDB housing grant from to $12,000 per month from $10,000 per month previously may simply divert demand away from the private property market. 

“We suspect this move may have also been partly intended to reduce leverage among the sandwiched middle class, besides absorbing the increase in HDB supply,” Citi noted.