Curbs put squeeze on landed home prices

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Last year, only 1,330 landed homes were sold compared with the 3,075 units in 2012. Experts point to well-heeled buyers in their 40s wishing to buy landed homes but are having trouble getting loans under tough new rules introduced in June last year.

-- ST Photo

THE Government's efforts to cool the property market are biting in a somewhat unexpected segment - landed homes.This coveted, once-resilient portion of the housing market has just registered its first price dip in more than four years along with plummeting sales numbers.

The slide comes amid growing evidence that curbs have reined in prices for non-landed homes.

Experts point to well-heeled buyers in their 40s wishing to buy landed homes but are having trouble getting loans under tough new rules introduced in June last year.

In the latest flash estimates from the Urban Redevelopment Authority (URA) on Thursday, the landed property index dropped 1.2 per cent for the three months to Dec 31, down from a climb of 0.7 per cent in the preceding quarter.

Experts had been expecting the slide, given that the tighter bank financing rules have made it harder for buyers to afford landed properties.

Also, prices of landed homes seem to have reached their peak.

"Here, we have the first confirmation that landed properties are affected," said Century21 chief executive Ku Swee Yong.

He noted that landed properties cannot generally be bought by foreigners and is a less speculative segment. "Yet the total debt servicing ratio (TDSR) is biting into this category."

Buyers of landed properties have been hit harder by the new TDSR framework, which caps a borrower's total monthly debt payments at 60 per cent of gross monthly income across the board - as they already have more debt.

"The loan restrictions are stacked against this category of buyers, who are generally over 40 years old, with other financial commitments such as cars and insurance," added Mr Ku.

The number of landed homes sold took a beating as a result. Last year, only 1,330 units were sold compared with the 3,075 landed homes sold in 2012.

Mr Alan Cheong, Savills Singapore's research head, noted that the decline was mostly in the second half of the year, when only 465 units were sold after the TDSR rules came in.

This was well down from the 865 units sold in the first six months of the year.

Mr Ong Teck Hui, Jones Lang LaSalle's national director of research and consultancy, also said that landed property prices have been at record levels, and that buyers have been showing resistance to the high or unrealistic asking prices seen on the market.

Jones Lang LaSalle data showed that prices of landed properties soared 86 per cent from mid-2009 to 2013, outpacing the 56 per cent jump for non-landed homes in the same period.

However, Mr Cheong pointed out that though landed property values appreciate faster than non-landed homes, their prices could also fall at a faster pace.

But landed homes - especially those with freehold lease terms - still remain worthy investments, as demand for these properties will continue to outstrip supply, experts said.

Landed homes under construction make up only 3 per cent of the total number of uncompleted homes here, said Mr Ong.

"Due to their limited supply, landed homes are still good investments over the long term. But with signs of price corrections, some buyers may hold off their purchases hoping to decide later, at a more attractive price."

Mr Cheong also said that buyers looking to invest in this segment should note that landed homes tend to deliver better returns than non landed homes over the longer term.

Source: Straits Times - 6 Jan 2014