New home sales predicted to drop 6% to 14,000 units in 2014

Private home prices to slip 4%.

According to Macquarie Research, it is forecasting new home sales of 14,000 units (-6% YoY) in 2014, with a 4% drop in overall private residential prices underpinned by high-end (-5%), mid-end (-4%) and mass market (-3%).

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The key attractions of buying property, which are negative real interest rates and positive carry, are likely to diminish in 2014 due to lower inflation and heightened difficulty in securing tenants amid rising vacancies and tighter restrictions on foreigner inflow.

Further, the effects of TDSR and previous cooling measures would likely continue to linger. While the government recently broadened the exemption for refinancing loans from the TDSR threshold of 60% to ease borrowers’ debt servicing burden, we do not see it as a relaxation of the cooling policies given that it does not apply to new mortgages.

New projects launched over the past few months have also drawn subdued take-up despite partially discounted prices.