Where are home prices headed?

Home prices are likely to hold their ground despite being pummeled by six rounds of cooling measures, according to most property analysts.

They pointed to low interest rates and a stable employment outlook as factors supporting prices.

They predicted the measures - including last week's new restrictions on loan terms - would take a toll on sales volumes. However, another factor helping to keep prices steady is the strong holding power of developers.

Some contrarian analysts said prices might fall by up to 10 per cent in the next 12 months.

But most agreed that private home prices are likely to continue flatlining instead. They have risen by less than 1 per cent in the first nine months of the year.

The measures announced by the Monetary Authority of Singapore last Friday included caps on loan terms to prevent buyers from over-extending themselves, and lower loan-to-value (LTV) ratios for certain purchases.

They were also meant to curb rising home prices driven by low interest rates and easy credit coming from a fresh round of cash stimulus in the US and Europe.

The experts held varying views over how the high-end segment might be affected. Some said the higher cash upfront required for these pricey homes could further slow the segment. However, others pointed out that these home buyers are typically cash-rich and do not take out large loans.

Source: The Straits Times – 13 October 2012