House prices in Singapore are expected to fall by up to five percent in the next two years.
Housing prices in Singapore are likely to continue falling even as the government may gradually ease the property cooling measures, said Fitch Ratings on Wednesday (15 March).
The ratings agency noted that Singapore’s efforts to curb property speculation in an environment of low global interest rates were effective.
Speculative purchases fell from 2009 as the government introduced stricter restrictions on mortgage lending while increasing stamp duties.
With this, house prices have fallen over the last three years, while housing loan growth has slowed since 2011.
However, the government’s “first modest move” to “reversing macro-prudential tightening” – which was introduced on 10 March – is unlikely to have a significant impact on the housing market.
“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,” noted Fitch.
In addition, local interest rates are expected to increase from their current low levels, while house prices are still expected to fall by another two to five percent in the next two years.
Nonetheless, Fitch said banks are well-positioned to withstand a sharper drop in property prices, partly as a result of macro-prudential tightening.
This is because “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,” it added.