Property prices should fall up to 30% to match 2009 pre-financial crisis prices

Property curbs may be ‘eased faster if prices drop sharply’
Property curbs may be 'eased faster if prices drop sharply': Straits Times
July 28, 2014 | News
By Melissa Tan
While the Government has said it is not time yet to relax the property market cooling measures, analysts noted that certain developments could prompt policymakers to act faster.
One could be a sharp drop in property prices within a short period, the analysts said during a round- table discussion organised by The Straits Times last week. The other would be a groundswell of unhappiness from a large number of home owners caused by sharply falling prices, the panellists added.
Their comments at the discussion, held at the Singapore Press Holdings office, comes amid a backdrop of a continued slowdown in the public and private housing markets.
On Thursday last week, Monetary Authority of Singapore managing director Ravi Menon said even though prices had eased, it was too soon to lift restrictions.
The softening of prices has recently led developers such as Mr Kwek Leng Beng of City Developments (CDL) and Mr Cheng Wai Keung of Wing Tai to urge policymakers to review some curbs.
Housing Board resale flat prices have slid 5.3% since June last year while private home prices have fallen 3.2% since September, going by official figures out last week.
This was after tough home loan curbs were rolled out in June last year.
Even so, experts said prices would likely have to fall a lot faster for policymakers to ease curbs, given that private home prices have climbed about 60% since the global financial crisis in 2009.
“I think they (policymakers) are looking for something more pronounced, a double-digit kind of price decrease,” said Mr Donald Han, managing director of consultant Chestertons.
“There’s more geopolitics risk now… Perhaps next year the Government may want to keep their hands a little bit closer to the button in case they need to unpick certain measures,” he added.
However, the experts were also quick to stress that a large price drop alone was likely not going to be enough.
CIMB economist Song Seng Wun said the speed of a drop is also crucial. “It’s not just the quantum but the period of time. If there’s geopolitics risk that suddenly adds pressure, it could be compressed within a short period of time.”
Mr Han agreed: “A 12% drop in 6 months would be very drastic, but a 12% drop over a 2-year period would be quite acceptable. It’s a timeline kind of focus for everybody, not just a number.”
Even then, they agreed that the psychological threshold could be as much as a plunge of about 20% in home prices.
This is because many people tend to take a loan of up to 80% of their home’s value at the time they buy it. A subsequent 20% drop in the home value could trigger banks to ask borrowers to top up their loan in order to keep their home.
Hard data aside, policymakers are likely also keeping an eye on sentiment, experts said.
“There have to be a lot of genuine cases saying, ‘I cannot stomach a 10% drop’, and that will start to get the whole process of relaxation started sooner than later,” Mr Han said.
“But so far, it’s been very quiet.”
In the meantime, the curbs have helped to stabilise the property market, the experts said.
Mr Li Jun, general manager of Chinese developer Qingjian Realty, said the cooling measures benefit the market by preventing a price bubble.
“The economy is continuing to grow and the Government is stable in terms of its policies, so in the long term, Singapore is still an attractive place for investment,” he added.
The 4th panellist was Mr Eric Cheng, who runs real estate agency ECG.
(source: ST 28th July 2014)