RENTALS.SG Comments: Further to falling property prices, our opinion is that rental rates, in absolute terms, will continue to fall and occupancy levels will remain flat across the residential rental property sector in 2017 – 2018. Yields may stay close to current levels as rental rates track down any curve in falling property prices.
Business Times 16 March 2017
While measures to cool Singapore's property market are expected to be gradually lifted in the coming years, home prices are likely to continue falling amid oversupply and rising interest rates, Fitch Ratings said on Wednesday.
The rating agency said Singapore's efforts to curb property speculation in an environment of low global interest rates had been effective. Speculative purchases have declined as, from 2009, restrictions on mortgage lending were made progressively tighter and stamp duties were raised. House prices have now fallen in each of the last three years and housing loan growth has slowed steadily since 2011.
"We expect further gradual loosening over the coming years, as the authorities balance supporting the market with guarding against risks,'' it said.
Fitch said macro-prudential settings are still tight, while high vacancy ratios, a slower pace of immigration, subdued economic conditions and a weakening labour market are all likely to continue weighing on prices. Local interest rates are also set to rise from their current low levels, as the US Federal Reserve tightens policy.
"House prices are still likely to fall by another 2-5 per cent over the next two years,'' it projected.
Fitch said Singapore's banks are well-positioned to withstand a sharper drop in property prices, partly as a result of macro-prudential tightening. Average loan-to-value ratios are low, loan-loss coverage is adequate, and capital and liquidity buffers are strong. Households also have healthy balance sheets and well-diversified assets.