The waiting game: Local property market deadlocked as sales standoff intensifies

Prices are unlikely to ease anytime soon.

Singapore’s property market is caught in a tricky impasse between home buyers, developers, and the government. 

According to OSK DMG, potential homebuyers are holding back in anticipation price declines on back of a massive flat glut in the next two years, while developers are also holding back launches in the hope that the government will ease its property cooling measures.

“Developers have incurred high land costs but do not want to launch any new project with poor buyers’ response and henceforth generate adverse publicity, which is detrimental to the future sales progress of the development. They also cannot afford to lower prices too much because of their high cost base, as well as an “implicit responsibility” to hold up property values for existing customers; especially those that have purchased units in another recent development in the same vicinity,” noted the report.

Developers are also holding back from new launches so as not to worsen the oversupply situation in the market, while hoping that the government will soon ease its stringent anti-speculation measures. New launches plunged 42.2% year-on-year in October. 

However, authorities are unlikely to relax their property cooling measures unless property prices drop significantly.
“It will be difficult to justify any easing of cooling measures, when prices are in general only slightly off their peaks in 3Q13,” the report stated.

Deputy Prime Minister Tharman Shanmugaratnam had previously stated that a meaningful correction has not yet been achieved. Before easing property prices, the government needs to see a significant reversal that will keep home prices from running ahead of household income growth in the long term.

“It is this impasse between buyers, sellers and to an extent authorities, that is slowing down transaction volumes and impeding sales progress. Without an external trigger, prices are likely to be still “artificially” held-up and we see this as the main risk for protracting any potential easing of the cooling measures or property prices,” OSK DMG concluded.