Dear Homebuyers Don't Wait For The Fall; The Spring Is Here

Last month, BNP Paribas predicted that after hitting bottom, property prices in Singapore are likely to rebound. After property ownership as a proportion of household assets in Singapore neared a record low, a very significant income growth will help property prices to rise as much as 10-15 per cent in the coming 12 or 15 months, the financial services major said.

Official data show that the prediction is about to be true. Data released by the city-state's Urban Redevelopment Authority show the third quarter (July-September) saw property prices moving upwards for the first time in four years.  The private residential property index rose 0.5 per cent to 137.3 in the September quarter. For the past 15 quarters, prices have been sliding; the index fell 0.1 per cent in the second quarter. Last property prices moved upwards in Singapore was in the third quarter of 2013, when the private home price index touched 154.6. As property became more affordable, the price-to-income ratio in the city-state fell to 10 times from the 12 times in the past decade.

Apart from the “very significant” income growth that has come as the by-product of an improving economy, a reduction in stamp duty charges is also being seen as a key reason that helped prices mark a pick up.

What does this teach an Indian homebuyer?

According to a PropTiger DataLabs report, property prices across top nine cities of the country remained stagnant in the first quarter (April-June) of the financial year 2017-18 when compared to a year-ago period. Except for a marginal increase in some cities, rates of property have remained stable year after year. This effectively means prices have been falling. Those who have not been able to make the most of this opportunity may be left disappointed if they expect a further fall in rates. In fact, this festive season may be your last chance to seal a profitable deal. From here on, prices may make an upwards movement.

Here is why.

• Most states have set their respective Real Estate Regulatory Authority. The new Goods and Services Tax (GST) regime is also effectively working. As developers struggle to make themselves compliant, great financial jugglery will be required to come out alive. As compliance cost for developers rise, the scope for cutting prices and offering freebies will be quite limited. "The real estate industry had high expectations — that GST would subsume stamp duty, registration and other additional levies. Non-inclusion of these additional heavy duties are expected to result in an inflationary impact on real estate," Niranjan Hiranandani, co-founder & chairman, Hiranandani Group, told media.

• Buying a house is cheap now because interest rates have been falling. The Reserve Bank of India has reduced the policy repo rate by a cumulative 175 basis points (bps) between January 2015 and June 2017. Banks reduced the one-year marginal cost of funds-based lending rates (MCLR) by a cumulative 77 bps between November 2016 and June 2017. In its Fourth Bi-Monthly Policy Review on October 4, the Central bank has kept the rates unchanged. "With inflation expected to rise closer towards the RBI's inflation target, we do not think there is much room to ease monetary policy further," financial services major Morgan Stanley said.