Why are OCR homes getting cheaper and cheaper?

It's a double whammy of oversupply and weak demand.

Mass market home prices suffered the biggest drop in the third quarter, with costs dropping by a more severe 1.6% compared to 1.1% in the second quarter.

Analysts note that the continued price drop in the Outside Central Region (OCR) is due to the potent combination of stringent cooling measures and rising supply.

“The sustained fall in OCR prices is the result of TDSR, which has a larger impact on the mass market segment where the capacity to take up loans is critical for middle income buyers,” said Ismail Gafoor, CEO of PropNex.

Barclays analyst Tricia Song warned that OCR prices will continue to decline due to the massive supply of unsold units in the region.

Over 11,000 units remain unsold in the OCR, with still more projects in the pipeline.

“We expect accelerating price declines in the mass market as we forecast peak completions for both public and (mass market) private housing in 2015 and 2016, increasing the vacancy rate to 9.8% and lowering prices by another 10% by mid-2016,” Song said.

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