New property fees seen to drive away foreign buyers

The 10% increase in transaction cost is expected to slow down foreign buying transactions this year.

In a statement, UOB Kay Hian said the jump in property fees will likely act as a “strong deterrent” against foreigners looking to purchase properties.

Foreign buyers, whose proportion has been increasing steadily from 11% in 3Q10 to 19% in 3Q11 accounted for about 21% of overall non-landed transactions (excluding executive condominiums) in 4Q11.

Meanwhile, the Urban Redevelopment Authority’s (URA) latest flash estimates indicate that private home prices stayed flat at +0.2% qoq in 4Q11 vs +1.3% in the previous quarter.

This is the ninth consecutive quarter of moderation in private residential prices. Overall in 2011, private property prices increased about 6% while public housing prices advanced at a slower pace of 1.7% qoq versus 3.8% in 3Q11. 

UOB Kay Hian said that while the flash estimates saw a mere moderation in physical property prices, the final figures due in the last week of January will likely reflect a downturn in property prices. 

According to the analyst, its recent show flat visits affirm the trend of falling volumes (about 20-30%) and moderating prices despite hefty discounts offered by developers. 

For 2012, it expects transaction volumes to slow by 20-30% and prices to fall by 10-15%.