Home cheap home: Private home prices to take another 10% dive in 2015-2016

Even transaction volumes will remain sluggish.

Singapore's property market welcomed the new year without so much as a single confetti. Primary transaction volume numbers disappointed everyone by shrinking to half of 2013's level and new home sales only hit 230 units. Although these drops were not surprising, the property market still reeled from its blow.

According to CIMB, Dec 2014 clocked sluggish primary home sales of 230 units (406 incl. executive condos or ECs), lower than Nov 2014’s 423 units but close to Dec 2013's 259 units. Sales continued to be focused on outside of the central region (58%), with interest in Core Central Region projects remaining lacklustre (15%). 

Here's more from CIMB:

As such, total primary transactions in 2014 came in at 7,546 units (9,142 incl. ECs), about half of 2013’s. This is not unexpected as demand continued to be adversely affected by the tighter credit markets and higher transaction costs. 

Looking ahead, we expect transactions volumes in 2015 to remain slow. With rising completion and higher vacancy rates, rents are likely to continue to compress, thus adding more downward pressure on capital values. Given the marginal price declines so far, we do not anticipate a loosening of policy measures on credit and transaction costs this year.

We expect private home prices to decline by another 10% in 2015-16. While the high-end market experienced the greatest price declines in 2014, the increasing completion of more suburban units over the next two years, particularly shoe-box apartments, are likely to depress property prices in the mass-market segment as well.