Not now, darling: Why Singaporeans won’t buy houses

Residential sales gridlocked by waiting consumers.  

More and more Singaporeans are now holding back from buying their dream homes. Developers are bearing the brunt of this hesitation, as residential property sales have been steadily declining since 2012. A recent survey by CIMB tells why.

The expectation of falling property prices and government policies are the key deterrents against buying residential property in Singapore, the report revealed.

Government policies such as the total debt servicing ratio (TDSR) and the additional buyers’ stamp duty (ABSD) accounted for 41% of respondents. Meanwhile, 39% of respondents cited the expectation of falling property prices as their main reason.

Only 14% of Singaporean respondents intended to buy a property within the next one to two years. In terms of time frame, an overwhelming 78% only expected to buy a property after three years.

According to the CIMB, “We believe that buyers are holding back their purchases as they wait for property prices to fall. That could leave us with a less-than-ideal situation of weak demand on top of rising supply with historically high physical completions over the next three years.”

The report also noted that developers are now taking the first step by providing discounts and promotions, and that restrictive government policies have a “real possibility” of relaxing in the future.

Here’s more:

Both the mortgage-to-income ratio and median home price-to-income ratio remain near the historical trough.

This signifies that income has kept up with rising property prices, with both ratios registering a CAGR of 5.8% since 2007. The inference is that most households can afford to borrow to buy properties, should they choose to.

Singapore remains fundamentally a good city to own a property and demand should be supportive when property prices fall to a reasonable level. In our view, that reasonable level is a 10-15% decline in the next two years. With the recent fall in property prices, we have already startedto see the proportion of foreign buyers creeping up.