SINGAPORE - Prospective home buyers should be mindful of risks and remain prudent before entering into long-term decisions like buying a property and taking on a mortgage, the Monetary Authority of Singapore (MAS) said on Thursday (Nov 28).
This is because ongoing uncertainties in the economic outlook and a softening labour market could negatively affect households' incomes and their demand for property. A large supply of unsold units in the medium term could also weigh on the property market.
In its annual Financial Stability Review, MAS pointed out that despite the decline in vacancy rate of completed units, the number of unsold units from launched projects (excluding ECS) has doubled from 2,172 units in Q3 2018 to 4,377 units in Q3 2019.
It added: "This increase will likely be exacerbated in the medium term as developers continue to redevelop and launch projects on sites arising from the large volume of en bloc sales from 2017 to 2018. The increase in the unsold inventory could place downward pressure on prices in the medium term, if unaccompanied by a corresponding rise in demand."
MAS cautioned: "Investors that borrowed at higher mortgage repayments relative to incomes, could face difficulties meeting the repayments on their investment properties,"
The cooling measures introduced in July 2018 have led to a moderated the private residential property market, MAS noted. Compared to the first half of 2018, private housing prices have moved more in line with economic fundamentals, overall transaction volume has dropped and developers are more cautious when bidding for land.
While relatively healthy developer sales were observed in selected project launches in the past two quarters, this was largely due to project-specific features such as good location. Other projects saw moderate sales in the initial phase of their launches. The volume of private home resales has also remained modest compared to pre-cooling measures levels, said MAS.
It noted that private home prices increased by 2.1 per cent year on year in the third quarter of 2019, lower than the 9.1 per cent jump in the second quarter of 2018, pre-cooling measures.
On a quarterly basis, prices rose by 1.3 per cent, at a slower pace compared to the quarter-on-quarter increase of 1.5 per cent in Q2 2019.
Overall sales of private homes increased in the last two quarters, led by sales of new homes excluding executive condominiums (ECs) which surged 40 per cent in Q3, compared to the previous quarter.
But "while new projects with attractive features and strong locational attributes were able to garner relatively healthy initial sales, there were several other projects that saw moderate sales in the initial phases of their launches," MAS said. It noted that compared to the year preceding the July 2018 cooling measures, overall transaction volume in the last four quarters fell 32 per cent, as resale activity continued to be muted.
MAS also said that the share of purchases by companies and foreigners remained stable, accounting for 1-2 per cent and 5-6 per cent of total transactions respectively over the past three quarters.
Outstanding housing loans growth has moderated and asset quality remains strong.
Outstanding housing loans dipped by 1 per cent in September compared to the same month last year. New housing loans rose in the past two quarters, in line with the increase in transaction activity, but they remain lower than the period before the 2018 measures, MAS noted.
The share of loans that are more than 30 days in arrears and the non-performing loan ratio for housing loans were at 1 per cent and 0.4 per cent respectively in Q3 2019, broadly unchanged from a year ago.