Home prices could drop by up to 15 per cent: DBS chief

Home prices could drop by up to 15 per cent: DBS chief

Monday, Feb 17, 2014

Mok Fei Fei

The Straits Times

SINGAPORE – House prices could plunge by up to 15 per cent this year amid a softening property market, said DBS chief executive Piyush Gupta on Friday.

Mr Gupta also said that he expects property cooling measures to be wound back if prices start heading south.

His remarks, which came during a DBS results briefing, are a further sign that real estate could be in for a difficult year.

Mr Gupta told the briefing: “My own sense is that you’re looking at a correction of more than 10 to 15 per cent. I think the correction might not be consistent.”

He expects the luxury segment to take the biggest hit while mass market home prices may drop by about 10 per cent.

Mr Gupta also held out hope that cooling measures could be tweaked if values begin declining.

“If the market continues to stabilise and there’s this beginning of a correction, I would expect the central bank and the Government to start taking off, removing some of the macroprudential measures they put in,” he said. “And if they do, then that will create support to the extent of the drop-off in the housing market this year.”

His comments came as property players, including City Developments executive chairman Kwek Leng Beng, called on the Government to consider relooking some of the market measures. Curbs on mortgage loans, particularly the total debt servicing ratio framework introduced last June, have curbed sales and slowed price growth. Private home sale prices slipped 0.9 per cent in the fourth quarter last year while HDB resale prices declined 1.5 per cent.

A decline in prices is not expected to have a material impact on DBS’ earnings, noted Mr Gupta. The bank cleared a stress test that crunched its numbers through a scenario of a 30 per cent fall in home prices. Any potential threat to its housing portfolio would come from higher unemployment, since affordability of home purchases here depends on income levels, Mr Gupta said.

“In Singapore, it continues to be full employment, so we’re not seeing any stress on that count.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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