Home prices to fall by 8-10%: UOB Kay Hian

September 13, 2011  

Residential property prices are expected to fall 8-10 per cent over the next year as government policies work their way through the market amid a worsening economy, according to brokerage UOB Kay Hian’s latest note to investors published yesterday.

It has been eight months since the Government introduced stiff stamp duties of as high as 16 per cent on the seller of a residential property and lowered the loan-to-value ratio to 60 per cent for individuals with one or more mortgages and 50 per cent for housing loans to buyers who are not individuals.

But UOB Kay Hian highlighted the huge oncoming supply and the deteriorating macroeconomic environment as key factors for its call, adding that home-buying activity would slow down sharply once the rise in unemployment accelerates.

UOB Kay Hian said property developers’ cautious stance in recent residential site auctions suggested moderating price expectations.

“Biddings for recent residential sites witnessed a lukewarm market response, with top bids coming in 10 to 15 per cent below market expectation. While developers actively sought to replenish their falling land banks, the cautious bidding stance is suggestive of moderating selling price expectations amid weakening macroeconomic environment,” the report said.

The report comes only days after the Real Estate Developers’ Association (REDAS) called on the Government to review its land sales programme to ensure that new supply is introduced only when the market is confident of absorbing it. REDAS on Friday had also urged the Government to review property cooling measures already in place so that genuine demand is not artificially suppressed.

In the second half of this year, the Government will put up for sale 17 private residential sites under the Confirmed List of the Land Sales Programme. Including sites recently sold, about 53,000 private homes will hit the market in the next few years.

At the same time, in the public housing sector, the Housing and Development Board will construct another 25,000 Build-To-Order flats next year, on top of the 25,000 already slated for this year.

Source : Today – 13 Sep 2011