June 11, 2014 1:00 am JST

Singapore's residential market dips

MAYUKO TANI, Nikkei staff writer

A man walks on an observation deck overlooking private high-rise residential condominium properties in the prime Orchard Road district in Singapore. © Reuters

SINGAPORE -- Singapore's residential market is showing signs of decline in the wake of official cooling measures implemented to avert oversupply. The official property price index for the first quarter of 2014 revealed a second consecutive quarter-on-quarter decline, ending a four-year climb.  

     Second quarter numbers are also expected to be weak, and with interest rates still low government policies are not expected to change. In 2009, to avert a property bubble amid historically low interest rates, the government introduced a range of tightening measures ranging from stamp tax hikes to loan restrictions.

     According to the Urban Redevelopment Authority, the price index of private residential properties in the city state was 211.6 in the first quarter of the year-1.3% down on the previous quarter. A smaller 0.9% drop was meanwhile recorded in the previous quarter. Up until then, the index rose continuously from mid 2009, except for a brief dip in early 2012.

     According to the Singapore Real Estate Exchange (SRX), the resale price index for private apartments in May was the lowest since early 2013 with luxury projects in the city center most affected. Prices of HDB flats-government-developed apartments in which more than 80% of Singaporeans live-have also fallen. According to SRX, the HDB resale price index fell 1.2% from April to May.

     With weakened demand attributed to government policy, sales have been slow in newly completed apartments, forcing developers to cut prices. In April, Capitaland reduced prices in the Sky Habitat condominium by more than 10% compared to launch prices in 2012. A government-linked property giant, Capitaland co-developed the condominium with Mitsubishi Estate Asia and Shimizu Corporation.

     Market research suggests more developers will cut prices. Anecdotally, the local press is reporting that many windows in recently completed luxury condominiums are dark at night, proving low occupancy. Some developers have also postponed project launches.

     Apart from Capitaland, slowing sales will hit other big names such as City Developments and Keppel Land. The prospect of any hefty write-downs on existing projects is nevertheless considered negligible by local analysts and stockbrokers.