Fewer people in Singapore are taking out home loans and this could see residential prices in the city-state fall after a brief resurgence. Singapore mortgage growth dropped to 1.9 percent in first 11 months of 2018, according to information from the Monetary Authority of Singapore.
This is down from 4.2 percent last year and only the second time in the past 25 years that Singapore mortgage growth dropped below two percent. Diksha Gera, an analyst at Bloomberg Intelligence, predicted that mortgage growth would most likely stay below two percent in 2019.
One reason for the falling Singapore mortgage growth was the rise of home loan interest rates. These increased by 0.3 percent following hikes made by the US Federal Reserve. Additionally, the government’s latest round of property curbs, which were unveiled in July of 2018, brought the Singapore property market to a halt once again.
Home prices declined during the final three months of 2018 ending a six-quarter streak of increases. Now many experts believe that property values and transactions could shrink in 2019 due to a number of factors.
“I expect the overall property market outlook to be weaker in 2019. Insecurity and bearish sentiment will result in potential buyers holding back purchases and adopting a wait-and-see approach,” independent property analyst Royston Foo told Bloomberg.
Developers aren’t holding out much hope for 2019 either. In addition to the shrinking Singapore mortgage growth, the latest Real Estate Sentiment Index (RESI) found that homebuilders held low expectations because of global economic uncertainty and increased competition among other issues.
Nice while it lasted
Last year saw the government increase the Additional Buyer’s Stamp Duty and decrease loan-to-value limits. The biggest changes saw the tax on foreigners buying property increase from 15 to 20 percent and a five percent tax increase on anyone not buying a home for the first time.
The move ended a short-lived turnaround where property prices experienced their first prolong growth cycle in nearly four years. In the first quarter of 2018, Singapore property prices recorded the biggest price increase in eight years, rising 3.1 percent, according to stats from the Urban Redevelopment Authority.
The price turnaround led to a rush of en bloc sales as developers looked for new sites. An en bloc sale is when at least 80 percent of unit owners in a single building agree to sell together.
MoneySmart found that there were more than 30 en bloc sales in the first half of 2018 alone, which drove Singapore home prices higher. Less than a month later, the government had rolled out their latest cooling measures which have now created a bleak outlook for 2019.