On back of supply glut and interest rate hike.
A substantial drop in residential property prices has still not materialized over a year after the government rolled out its stringent property cooling measures. Now, industry watchers state that the anticipated price drop may well happen next year, as developers struggle to woo hesistant buyers.
OCBC forecasts that residential home prices will dip 10%-15% over 2015-2016. OCBC notes that the government will only consider reversing some property cooling measures once prices have dropped by 10%, which is likely to happen in the second half of next year.
“A heavy physical oversupply situation ahead, coupled with anticipated interest rate hikes from the Fed in 2H15, will likely keep buyers on the back foot going forward. That said, a price crash in excess of 20% is improbable, in our view, given the high price elasticity of demand in the housing market; that is, we will likely see significant buyer demand coming into the market at lower price points,” noted OCBC.