Home prices in Singapore to get cheaper by 10-15%

Here are 3 big reasons why.

According to CIMB, it expects a 10-15% drop in property prices in 2014-15. This is fueled by 1) the decline in investment and foreign demand; 2) higher price sensitivity within the upgraders segment and 3) significant supply in the pipeline.

Here's more:

Our recent ground checks suggest that it is still a buyers’ market, particularly in the secondary market. Prices are just beginning to come off. We believe the catalyst to drive down physical prices will be supply, with 17,540 and 21,299 units expected to complete in 2014-2015 respectively, more than two times the 20-year historical average supply of 8,034 units p.a.. 

What Happened 

URA’s 1Q14 flash estimate of the property price index (PPI) showed a qoq decline of 1.3% vs a 0.9% decline in 4Q13. 

The current level is 2.2% below previous peak in 3Q2013. Prices of non-landed private residential properties across all market segments declined in 1Q14, with the rest of central region (RCR) falling by 2.8%, core central region (CCR) by -1.3%, and outside central region (OCR) by -0.3%. In the public sector, HDB resale prices declined for the third consecutive quarter by 1.5% qoq and remain 3.9% below previous peak. 

Mitigating factors. We take comfort in the fact that buyers are generally not over-leveraging to buy residential properties, at 5-6x home price-to-income ratio and 23-29% mortgage-to-income ratio. 

Moreover, developers have diversified into investment properties and overseas, with the Singapore
residential segment making up less than 30% of GAV for most developers.