Should the ABSD be removed?

ABSD – Additional Buyer’s Stamp Duty. Though mentioned less this year as other property cooling measures take over in significance, this nevertheless is a rather big hump investors have to get over should they wish to purchase properties for investment purposes.

Implemented in 2011 by the Monetary Authority of Singapore (MAS), it applies to foreign investors, Singapore PRs (permanent residents) purchasing their second and subsequent properties and Singaporeans purchasing their third and subsequent properties. This and other property cooling measures have successfully curbed the blossoming of a potential housing bubble which threatened to grow in 2009 and 2010. Combined with the Seller’s Stamp Duty (SSD), of up to 16 per cent, property speculation is significantly lower than before. The highly affluent are rarely affected but it has helped keep individuals relatively debt-free.

SantoriniAnother positive that came out of the previous couple of years of policy adjustments is more transparent industry practices. Developers are now required to submit weekly transaction data to the Controller of Housing, including incentives provided to buyers such as furniture vouchers, cash rebates, stamp fee or legal fees absorption and sales volume. That will help project a truer image of how the industry is fairing and what are the actual market prices and keep pricing more realistic.

The restrictive loan-to-value limit has perhaps affected the industry a tad more as it has brought prices down and maintained a level playing field. Whether the government has brought property prices to a level affordable for majority of Singaporeans is yet to be seen clearly, but with the recent election just over, all eyes could be on the new government to see what else they can or will do.

When will property cooling measures cool off ?

The past two years have seen the implementation, and perhaps effects, of a series of property cooling measures. From increased stamp duties to revised subsidies and the strictest of which, the TDSR (total debt servicing ratio) framework, restrictions have certainly risen the heat on the property industry.

Singapore still has some way to go before the property market achieves the sophistication it requires to reach new heights. Economist are estimating the second half of 2015 as the earliest the authorities are likely to cool off with the cooling measures. That is when most households would have managed to reduce their debt levels. However, property prices can be expected to fall by more than 10 per cent in the first half of next year, or at least show a substantial decline before curbs are removed. In fact, by 2016, property prices are expected to fall by up to 20 per cent due to the oversupply at that time.

Prices have stablised somewhat since the implementation of the property cooling measures, but the fall has only be about 3 per cent, which means the authorities could be waiting for a significant fall in figures, or a recession, before amending the rules. The fear could be the sudden upward rebound of prices which may far surpass the watershed of 2009. With the elections coming in 2016, 2015 seems like the turning point for the market and buyers and sellers alike may be watching closely to catch any opportunities  they can before things change once more.

Could 2015 be the year for home buyers? How will landlords, developers and sellers fare?

Authorities not ready to ease property curbs

The property industry has been hoping for a respite from the several rounds of property cooling measures rolled out over this year and the last. But the Monetary Authority of Singapore (MAS) managing director, Ravi Menon, recently said that even though home prices has ease somewhat and has leveled the playing field slightly, there are still risk factors which prevents them to being able to release their hold on the reins.

Home prices have risen an astounding 60 per cent from 2009 and over the past year, it has only fallen 3.3 per cent. Though it is quite impossible for home prices to fall to the level before the 2009 boom, they are hoping nevertheless to keep the markets stable before easing the restrictions.

Singapore real estateThe measure which affected the market the most could be the mortgage loan curb. The TDSR (total debt servicing ratio) framework has put many buyers hoping for a home loan out of reach of their desired property. This has indirectly caused developers to shake a little on their footing and prices of new properties dropped slightly over the last 3 quarters. But property prices are still relatively high and the fear is that any relaxation of the current rulings might cause an upward spiral process which might be more detrimental in the long run.

Battling inflation has been one of the key issues for the country’s rulers and with housing becoming an increasingly crucial factor of nation development, the property market here would be largely linked to policy-making.

$1 million sweet spot for home prices

The average affordability ceiling for properties have dropped by almost $200,000 ever since the Monetary Authority of Singapore (MAS) placed curbs on loans. The average price home buyers can now afford, or are willing to fork out, is $1 million. Properties between the total quantum range of $800,000 to $1. 2 million generally sit better with buyers. The range used to be wider, with homes reaching $1.4 million selling just as well.

LakevilleDevelopers have been quick to realize the shift and have been offering considerable discounts or competitive pricing for new launches. Smaller units such as studio apartments and one- or two-bedders have also performed better than their larger counterparts. About 8,254 homes priced between $700,000 and $1.2 million were sold during the last year. Properties which were offering more affordable units, such as the Coco Palms in Pasir Ris which launched units at $980 psf, were able to garner more sales.

And for buyers hoping to secure a home below $500,000 there are now more available, and more sold. In the last year, 291 units below $500,000 were sold from June 2013 to June 2014. Comparing to the year before, only 61 units were sold within the same time frame. Buyers consider smaller units easier for both occupier and rental purposes, plus most HDB upgraders rate affordability of homes as between $900,000 to $1 million.

Property cooling measures will remain for now

Ever since the Total Debt Servicing Ratio (TDSR) framework was implemented a year ago in June 2013, the home financing front has taken a big hit. But the authorities are not ready to loosen the reigns on the cooling measures just yet.

The Ministry of National Development (MND) is taking its role in “ensuring a stable and sustainable property market” very seriously indeed. Besides the debt servicing framework, it has also increased stamp duties on second and subsequent property purchases, coming down hard on speculative property-buying.

Eight RiversuitesConsidering the fact that home prices have almost doubled in just four years’ time, the word ‘inflation” does not even cover the extent of the increase. With the rate of increase, especially in mid-2009, the authorities may be rightfully wary of the reverse effect should the measures be lifted now. Prices might very well rocket even higher and then there will be no bringing it back down. And that may impact the social and economic tensile strength of the young nation.

On the other hand, the interest rates at the banks are low for now, and it is an incentive for taking out loans. But with the TDSR framework, how many qualify for these loans and will Singaporeans now look outside of Singapore to invest instead? How will that impact Singapore and her plans to become a global city?

More aiming for two-bedroom apartments

This is on the back of the recent property cooling measures and declining rental demand. Most investors have previously gone for one-bedders for the affordability and rental potential. But as the landscape changes under the bent of most recent adjustments in the real estate industry, market demand is now for two-bedders instead. Buyers are opting for this property type as they provide a better option should they wish to live in them instead of merely relying on their property purchase for rental purposes. Borrowing restrictions could also have played a big part in the change in the direction demand blows.

Urban Vista at Tanah Merah.

Urban Vista at Tanah Merah.

Property developers have also began reducing the number of one-bedroom units within a private residential development. For most suburban projects, two and three-bedders could be the most popular and numbered units. In prime units however, due to space restrictions and the high psf prices, the take-up rate of one-bedders are still high.

In a number of private properties launched only this year, such as Urban Vista, D’Nest, The Trilinq and Novena Regency, two-bedroom apartments were selling faster than one-bedders. Property buyers are apparently now purchase homes rather than properties. Meaning owner-occupation takes priority over investment yields. Two-bedders also have a lower psf prices with a more affordable quantum. In the long run, two-bedders are deemed more prudent investments against a weaker rental market as compared to one-bedders which may be more susceptible to market downswings.

CosmoloftThe dip in interest for shoebox units also shows in the slowed sales of units at the newly launched 56-unit freehold condominium in Balestier, Cosmo Loft. According to Urban Redevelopment Authority’s data, only 4 units were sold since its launch in June this year. In the previous couple of years, shoebox units have been all the rage, with one out of seven units sold in 2011 being a shoebox flat. Some of the most popular developments with shoebox units were Spottiswoode 18, Skysuites@Anson and The Interweave.

Does this shift in dynamics an early indication of the possible turning point of the Singapore property market? Is the bubble, if it could be called one, about to burst?

Migrating pool of property investors?

Last weekend’s new property curbs were targeted at property investors more than home buyers, according to the Ministry of National Development. So how exactly will property investors react against these new measures?


What the Monetary Authority of Singapore (MAS) has implemented is a Total Debt Servicing Ratio (TDSR) framework which not only applies to property loans but also all individuals. According to Barclays economist, Joan Chew, it is more a means of ensuring financial stability than a property cooling measure per se. Banks now also have to do more to ensure they have full knowledge of their clients’ borrowing capacity and any other financial commitments.

But there are still buyers with money to spend, possibly even an increasing number. Where will they head to then? Since this measure will be more likely to impact those looking to purchase their second or subsequent home and many are expected to opt for cheaper, smaller options.

Here are what the property analysts anticipating:

  • Sharper rise in property prices in
  • Property investors turning instead to foreign properties
  • Increased preference for smaller homes

Melbourne Australia propertyOverseas properties such as those in Malaysia, the United Kingdom, Australia, New Zealand and even New York have been in the radar of property investors and perhaps with this move, more will be heading for greener investment pastures.


Resale home prices – Blowing hot and cold

Barely three months after January’s cooling measure, property prices are soaring once again, perhaps even more than before. In March, prices of resale homes rose 1.1 per cent, but April brought it up to second gear with a 1.9 per cent rise, according to the latest Singapore Residential Price Index (SRPI) numbers.

Aspen Heights condominium in River Valley.

Aspen Heights condominium in River Valley.

As per the current trend, suburban homes continue to make a more resounding impact on the market, with prime district properties growing at a slower pace. Growth is evident, nevertheless. It seems unlikely that property prices are likely to cool, at least not based on the latest round of property cooling measures which only saw an increase in stamp duty. This is barely enough to deter determined property buyers and investors any longer. The effect of January’s cooling measures on cooling the market is yet unclear, but from the numbers, it certainly seems like the impact is shallow and not very long-lasting.

R’ST Research director Ong Kah Seng thinks resale properties may do better than new ones because of its immediate value. Since there is no wait for building completion, rental income could be immediate and since they come with a lower additional buyers’ stamp duty, more buyers looking to invest in a second property will be inclined to purchase a resale property instead of one from a newly launched residential project.

New property Herencia on Kim Yan Road.

New property Herencia on Kim Yan Road.

In February this year, the number and prices of homes sold dipped for a month, partly also because of the Chinese New Year lull. But already in March, a rise is seen and it continues well into the second quarter of the year. The SRPI showed an increase in home prices particularly in the Outside Central Region (OCR). Properties in these areas jumped 2.4 per cent. Another notable increase is in the prices of smaller units. Units of 506 sq ft and less climbed 1.8 per cent in April. Although the seventh round of property curbs implemented in January were described as one of the most comprehensive since the series of cooling measures started in 2009, there is apparently a proportionately decreasing effect with the increasing number of cooling measures. Is there an end to Singapore’s home pricing saga or should we brace ourselves for a continued increase?