Impact of 2011 property measures more intense than we thought

URA's home price index rising by 1% from Jan-Aug isn't the real picture, says Macquarie.

Private residential prices rose 1.0% in the first nine months of 2012, defying expectations of a price decline on the impact from measures to cool the sector but Macquarie's forecast was for a 10% correction in prices.

"The price index from the Urban Redevelopment Authority (URA) however, is based on the caveats lodged by the buyers. They do not take into account absorption of stamp duties on some projects, as well as discounts in the form of furniture vouchers when projects are completed. Adjusting for such stamp duty absorption and discounts, average prices would have been 3-5% lower this year," it said.

Macquarie meanwhile said that the residential market was resilient in 2012 in general and as predicted, despite the impact from the two onerous government cooling measures announced in Jan 2011 and Dec 2011.

New home sales reached 17,844 units (excluding ECs) in Sep 2012, +45.1% YoY, driven mainly by projects sold in the mass market (75% of total new home sales). "This reflects demand from upgraders from the Housing & Development Board (HDB) public flats, as well
as Singaporeans buying a second or third home as investment," it said.

"The low interest rate environment and the sub 2.0% mortgage rates, together with a positive yield spread and a real negative interest rate situation were the main reasons for the strong demand," it added.