Primary home sales in Singapore predicted to plunge to 15,000-17,000 units

Due to stricter finance measures.

According to Colliers International, the Monetary Authority of Singapore (MAS) introduced a new debt servicing framework for property loans on 28 June. 

The new rules, which take effect from 29 June, involve the adoption of a Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions to individuals.

In consideration of such rules and barring any unforeseen shocks, primary home sales which stood at 9,770 units at half time, could come in at between 15,000 and 17,000 units for the whole of 2013, down from the initial forecast of 16,000 to 18,000 units. 

Here's more from Colliers:

The MAS requires banks to take into consideration all of a borrower’s outstanding debt obligations – including loans for cars, renovations and credit cards when granting property loans.

Further, “guarantors” will have to be included as coborrowers and stated as one of the purchasers on the option to purchase. Additionally, banks are also required to use the income-weighted average age of all co-borrowers based on their monthly gross income when applying the rules on loan tenure.

The new rules effectively plug the loophole that homebuyers have previously employed to purchase multiple properties while circumventing the original intent of the lower loan-to-value (LTV) ratio and the ABSD, which have undermined the effectiveness of the cooling measures to some extent.

Separately, new housing demand may weaken on the back of potential interest rate hikes due to the cut back in monetary stimulus by the US Federal Reserve.

All in, investment demand may be shaven off with stricter financing regulations following the implementation of the new rules. The plugged loophole, reduced affordability and less flexibility in cash flows may also help to rein in prices that are currently at another new alltime high.

Nonetheless, developers’ project launch strategies could turn more aggressive in terms of timing and incentives as it would be more advantageous for them to launch sooner rather than later given the latest changes in the market. In turn, this could continue to be supportive of home demand.