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Q412 Statistics Validates Timely Property Cooling Measures
Property prices continued to defy fundamentals by growing at in the face of multiple measures implemented to cool off the market. The latest round of property cooling measures was announced on 11 January 2013.
HDB resale flat values and cash over valuations (COV) continues to record growth. The highlight of accelerated growth was found in HDB executive apartments and private properties. The latter rose about 3 times the growth recorded in the 3rd quarter.
These figures are a cause for concern as property buyers who were holding off buying anticipating prices to cool off are left mesmerized. There is a feeling that nothing can stop prices hitting astronomical heights. And home buyers may have to bite the bullet by going along with the wave and buy at high prices before it really gets unaffordable.
The silver lining is that the latest measures are nothing short of comprehensive and somewhat aggressive. Some industry experts are predicting price corrections of up to 7% this year. The significance of the latest round of measures was even a consideration in the F&N corporate tussle.
But if history is a sign of things to come, experts predicting price corrections have already been proven wrong again and again after each new policy implemented.
The biggest puzzle is how developers are going to sell uncompleted new launch condominiums at a low price when they have paid exuberant prices for the land to build them. And property buyers will likely hold off buying anticipating a price correction. It will be interesting to see which party blinks first as the situation develops.
Mass market condominiums are expected to be affected most. Buyers of luxury properties are often cash rich and purchase with cash even seeing additional buyers stamp duties (ABSD) as part of the purchase price.
Developers will now likely hold off launching their projects and observe the performance of other launches before deciding the best approach to keep up with their sales projections. The most likely scenario is offering discounts and rebates on ABSD and furniture. Slashing prices for projects that have been launched previously can incur a major backlash from those who have already bought.
Statistics for 1Q13 is going to be a big determinant on where the market will be moving. Because if such a comprehensive set of January measures is unable to soften the property market, it will look like only drastic measures that will hurt the market as a whole can make a difference. That is something a lot of people do not want to see.