Policy shifts could siphon off demand for private homes

Published 2 June 2011
The Business Times
By Uma Shankari

HDB moves will lead to more balanced housing supply-demand, says CS

Two recent policy shifts by the Housing & Development Board (HDB) – the move away from the build-to-order system and the plan to raise income ceilings for buying new HDB flats – may cannibalise the market for mass-market private homes, Credit Suisse said in a new report yesterday.

Policy shifts could siphon off demand for private homesHDB announced the changes last week. The government agency is trying to make its public flats more attractive to couples hunting for their first homes. It will also ramp up the supply of new flats in 2011 and 2012.

The changes will lead to a ‘more balanced’ housing supply-demand situation, Credit Suisse analysts said.

‘Affordable housing for Singapore citizens, following the recent years’ surge in residential property prices, has been one of the most hotly-debated issues of the general elections. In our view, this space is likely to see the most meaningful longer-term policy changes, especially with the appointment of a new Minister of National Development, Khaw Boon Wan,’ said the report.

On top of this, the bank expects the government to try to strike a better balance between GDP growth and the quality of living for Singaporeans.

Hence, over the medium term, Credit Suisse economist Kun Lung Wu expects population growth to slow to 1-2 per cent and real GDP growth to slow to about 4 per cent – although the bank said GDP growth will still hit 6.5 per cent in 2011 and 5 per cent in 2012.

All these factors combined should lead to a more balanced demand and supply situation over the next three to five years and result in more moderate price appreciation in the residential sector, the report said.

‘We expect price moderation with more government supply, but prices are unlikely to slump in near term on strong economic fundamentals, strong balance sheets and low interest rates,’ the bank’s analysts said.

The bank also did a sensitivity analysis, which showed that the expected completions of an average of 14,500 private homes a year from 2011 to 2014 could be absorbed by the market – provided immigration growth remains at or above 70,000 a year (below the 150,000 average from 2005 to 2009), with a household size of five persons.

For equity plays, Credit Suisse also said it prefers hospitality, retail and prime office plays as it expects the mass market residential sector to face the most headwinds.

The bank issued fresh ‘outperform’ calls on Overseas Union Enterprise (OUE) and City Developments for their hospitality and prime office exposure.

Credit Suisse also gave ‘outperform’ ratings to three trusts – CapitaMall Trust, CDL Hospitality Trusts and Mapletree Commercial Trust.


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