Singapore Home Sales Drop, Central Bank Sees Stabilization

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The number of homes sold in Singapore dropped more than 80 percent in December from the previous year, in what could be a prelude to a tough year for the country's property market. The central bank, however, says the country is stabilizing.  

With government rules affecting buyers and fewer new projects from developers, only 259 units were sold in December, the lowest level since January 2009, according to figures from the Urban Redevelopment Authority. 

Annual home sales in Singapore totaled 15,301, dropping 33 percent in 2013, according to government data. 

Last summer Singapore's government introduced new restrictions for lenders granting property loans, in an effort to cool the property market. 

Home prices fell during the fourth quarter for the first time in almost two years, dropping annual gains to the smallest amount since 2008 as mortgage curbs showed effects in Asia's second-most expensive housing market. 

Market analysts expect home sales to drop for most of this year. 

"Assuming that the current cooling measures and lending rules are in place, the total number of new developer sales are expected to be at least 30 percent lower compared to last year's developer sales," Alice Tan, head of consultancy and research at Knight Frank Singapore, told Reuters. 

However, analysts don't believe the city-state will experience a major correction in its property and credit markets. 

"What happened for this year is that there was a sprint in the first half, and now it is slowing down to take a breather after the measures came in," Desmond Sim, Head of Research at CBRE, told Reuters.  He expects between 10,000 to 12,000 property units to be sold in 2014 compared with just under 15,000 in 2013.

Singapore's central bank responded to a column on the Forbes website forecasting an Iceland-style meltdown for Singapore. 

"The government and MAS have taken decisive steps to cool property demand and prevent excessive leverage," the central bank said. "Singapore's banks are resilient, with strong financial and capital positions."

Iceland was forced into recession in October 2008 when its three largest banks defaulted on $85 billion, forcing the government to seek bailout from the International Monetary Fund.  

"The central bank here has been more wary of excessive lending since the 1998 financial crisis," Song Seng Wun, an economist at CIMB Group Holdings Bhd. in Singapore, told Bloomberg. "The risk of Singapore heading in the direction of Iceland is extremely unlikely and there are enough analysts from reputable investment banks and credit-rating agencies on the ground here to flag that if such a risk were to emerge."