Singapore Home Price Declines Seen Continuing as Defaults Rise


JANUARY 27, 2015

A private residential complex, center, stands among public housing buildings in the Toa Payoh district of Singapore, on Aug. 11, 2014. (Bloomberg Photo/Bryan van der Beek)

Alex Zou joined about 100 Singaporeans who packed shoulder-to-shoulder into an auction at the Amara Hotel on a Friday afternoon looking for a cheap home to buy.

The bargain hunters who stuffed themselves into the 50-seat conference room are another sign of the decline of Singapore’s housing market. After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a decline in the number of foreign buyers. Banks auctioned 118 repossessed homes last year, about 10 times the number in 2013, said Mok Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle.

As the auctioneer at the hotel bellowed apartment prices and scanned the room for bidders, Zou held back in anticipation of better deals later this year.

“I have been coming to these auctions hoping to find a bargain,” Zou, 50, said. “Hopefully prices will fall more.”

During the housing boom in Singapore, prices soared 40 percent to a record in 2013, spurred by low interest rates and demand from foreign buyers. As prices peaked, the government capped borrowers’ total debt repayments at 60 percent of their income, making it harder for Singaporeans to refinance loans, and placed additional taxes on home purchases by foreigners and levies on property sales.

The measures cooled the market: Singapore’s home prices fell 4 percent in 2014, the first year-on-year decline since 2008.

Vacant apartments

The restrictions have had the biggest effect on landlords and the rental market. Landlords face a rise in vacant apartments as more new properties come on the market this year and the pace of foreigners arriving in Singapore slows.

Vacancy rates for private residential homes rose to 7.8 percent during the fourth quarter, up from 6.2 percent in the same period a year ago and the highest level since the last three months of 2005, data from the Urban Redevelopment Authority show.

City Developments, Singapore’s second-biggest developer, warned last year that the local housing market may face “fire sales” and mortgage defaults due to falling rents, especially for high-end homes. Rental prices of residential properties fell by 3 percent last year compared to a 0.9 percent increase in 2013, URA data show.

Nonperforming mortgages

“Some of the properties in the auction are those where the owner has multiple properties and he can’t rent them,” said Grace Ng, deputy managing director at broker Colliers International in Singapore. “If the government measures are not relaxed or removed we could see more sales” by homeowners who are in default.

Only a small portion of Singaporeans are having difficulty repaying their mortgages. Less than 1 percent of mortgages were in arrears, with payments more than 30 days past due, as of Sept. 30, according to the Monetary Authority of Singapore’s latest financial stability report released in December.

The authority said it’s closely monitoring non-performing loans after the slight increase in defaults to 0.36 percent from 0.28 percent of the total outstanding mortgages between the first and third quarters of 2014. The increase was “attributed to a handful of high-end housing projects,” the MAS said.

More than 20,000 new homes will come on the market in 2015 and a similar number in 2016, up from about 17,911 in 2014, according to the URA.

Ruling party

Just as supply is rising, the demand for rentals is falling. The government, led by the People’s Action Party, has clamped down on expatriate hiring after the issue spurred some Singaporeans to vote against the ruling party in the last election they won in 2011.

The number of employment passes issued in the first half of 2014 rose only 0.9 percent to 176,600. That compares with a more than 20 percent jump in each of the two years to 2011.

Homes in some prime residential enclaves were offered at auction last year, data from Colliers showed. These included units at newer developments such as Marina Bay Residences, The Sail at Marina Bay, Reflections at Keppel Bay and Turquoise in Sentosa Cove.

“Besides the stringent loan curbs, which made it difficult for local homebuyers to secure loans, particularly for properties with higher price tags, the falling yields as a result of the softer rental market have also deterred investors from committing to purchases of investment homes,” Ng at Colliers said.

Repossessed homes

Sales of repossessed apartments could climb by a third this year as credit remains tight and home prices decline, said Mok of Jones Lang LaSalle.

Zou, the homebuyer, is hoping to get a deal on a three-bedroom apartment in the same Singapore suburb where he currently rents, he said. He expects more homes to be repossessed and a further decline in prices.

“There are no bargains available yet,” Zou said. “For now, I’ll wait and watch the market.”