Falling home prices have become somewhat of a norm since they began their descent at the end of 2013. Experts predict more pain to come, but don't expect cooling measures to be wound back just yet.
The raw numbers look compelling - prices are down around 11.2 per cent from a peak in the third quarter of 2013, but the Government will likely have a bigger picture in mind.
It is focused on keeping the real estate market stable amid rising interest rates and an uncertain economic outlook.
At first glance, that 11.2 per cent price fall may seem substantial, but look at it within the context of a 62.2 per cent spike from the second quarter of 2009 to the third quarter of 2013 and the picture changes considerably. Home values may not have fallen enough to convince policymakers to ease the cooling measures, including the total debt servicing ratio framework and additional buyer's stamp duty, any time soon.
The gentler decline in prices last year indicated that the market is nearing a bottom. Latest estimates showed that overall private home prices fell by 3 per cent last year, a slower clip compared with the 3.7 per cent drop in 2015 and 4 per cent in 2014.
Although private home prices are expected to continue to fall this year, the decline will likely be gradual, supported by higher land costs.
In addition, many developers still sport healthy balance sheets and raked in decent sales last year as investors returned to pick up new units. Developers sold 7,769 new homes, excluding executive condominiums, in the first 11 months of last year - surpassing the 7,440 units shifted in the whole of 2015.
The sales showed that underlying demand for private residential properties remained resilient despite the weaker market.
With the spectre of rising interest rates looming and a poor leasing market, investors need to be more prudent in their property investments.
If the Government unwinds cooling measures now, it would certainly open the floodgates to more investments, which may risk destabilising the property market and potentially spark a renewed surge in prices.
So the new year will be much the same as the old one, with cooling measures locked in - at least for now.
Adapted from: The Straits Times, 4 January 2017