Home prices down all around

Landed. Non-landed. Private. Public. Across the board, prices of all residential properties seem to have taken a hit in the last quarter.

Prices have dipped, some sectors more than the others, but signs are pointing to a possible slowdown in the market due to governmental curbs and the increased number of new property launches over the last 2 years. With the last price decline registered in 2005, resale HDB flat prices have been on the downhill slope for 2 quarters now. Private property prices have also suffered albeit to a lesser degree, with the lowest prices since 2009.

Mon JervoisMight it truly be the buyers’ market this year? Will this prompt more buyers to jump on the opportunity or are there other factors which might keep them away from the cash register? The tighter loan restrictions such as shorter loan periods, lower debt-to-income limits, and higher stamp duties may still be an obstacle to some buyers, thus sellers eager to cash in on their properties may find themselves having to wait a little longer for a good deal to come by.

Location usually still trumps all, though considerations such as space, amenities and living environment all have a part to play in the final selling price. With more new private condominium launches and new HDB flats pushing their way into the market this year, competition on the rental front is proving tough as well. Buyers now have more options for comparison and may be tempted to wait for prices to drop even further or wait it out for the best deal.

Even prices of suburban private homes, which have been the main stalwart of the property market last half of the year, have slipped 0.6 per cent. And as resale HDB flat prices drop, so have the number of HDB upgraders who may require the cash from the sale of their flats to purchase private homes. In turn, demand for mass-market suburban homes may fall.

Will it be a sombre year for Singapore’s residential property market?

Foreign property buyers not biting

National Development Minister, Mr Khaw Boon Wan has announced a significant drop in the number of foreign buyers of property in Singapore, from 17 per cent in 2011 to only 7 per cent in Q3 of this year. From 1, 400 transactions per quarter in 2011, it’s now down to 330 transactions last quarter.

Was the high in 2011 reason for the government implementing the 10% Additional Buyers’ Stamp Duty (ABSD) in December of the same year, and is the current drop the intended goal of that exercise? Sub-sales, which are an indication of the property speculation level in the market, has decreased by 3 per cent. It stood at 7.6 per cent in 2011.

The Creek in Bukit Timah.

The Creek in Bukit Timah.

This year, there were a few rounds of property cooling measures, including a new debt-servicing framework and also caps of loan limits. Increase in the ABSD percentage may have also put a bitter taste in the mouths of some investors. The luxury market has been quiet for awhile, but property developers seem to be hopeful about next year, with some holding back on launches, waiting out the year-end festive period which is usually a lull period for the property market.

Moving forward, Mr Khaw says regulatory policies will need to remain nimble in order to deal with a fluctuating and ever-changing industry. Although many other countries have had stricter property-buying rules for foreign buyers, such as in Australia, it does not necessarily mean the property market is entirely stable. They are in fact experiencing signs of a property bubble and thus being able to react to market response is a skill the authorities will have to hone. Perhaps also with some good luck on the side.

There are no restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention there instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

There are now increasing restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention elsewhere instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

In Hong Kong, the government is already imposing a 50% down payment on properties. With the minimum sum raised six times over less than three years, they seem determined to find ways to make homes more affordable. The Singapore government has not resorted to such drastic measures yet, but in future, will we go down the same road? Will more Singaporeans be able to afford their own homes then?

Lower demand for Resale HDB flats

Mainly due to the property curbs which have gotten buyers less hyped up about investing in a resale HDB flat. Before, resale flat prices have been nudged ever upwards due to the sheer number of property buyers who were hoping to invest in a cheap option which would thereafter help rake in profits through rental.

New rulings in 2010 require anyone owning a private property would have to sell off their private property within 6 months of purchasing a unsubsidised HDB flat. But this also means that more HDB flat owners are holding on to their flat which may also lower the supply of resale flats in the market. This, and perhaps combined with the number and price of private condominiums entering the market in the past 3 years, has meant more property investors see more value in investing in a smaller suburban apartment instead. In 2011, the additional buyers’ stamp duty of up to 16 per cent has made private property owners sit back and reconsider selling off their private property.

HDB Flat Exhibition 2013. Photo by HDB.

HDB Flat Exhibition 2013. Photo by HDB.

Have these policies helped those with real intention or need to downgrade? For those downgrading from a private property to a HDB flat, there is a 30-month wait period after selling their home before able to purchase a subsidized flat. This ruling has met with strong resistance with the HDB receiving up to 4,700 appeals to waive the wait period which means most sellers have to turn to renting properties while waiting for their new home.

How does this impact the resale HDB flat market and does this make for a more level playing field or does it keep home owners from making better options in jumping from one property sector to another?

Local home sales and prices expected to take a hit

Will property prices finally come down following the rounds and rounds of cooling measures meted out by the authorities? It seems they might very well be, as property industry experts predict a possible slowdown of home sales volumes and prices due to the recent curbs on property loans.

What is in store for Singapore's real estate market in H2? And this might be directly tied to rental prices and demand in the market. Currently the vacancy rate for private residential properties is at 5 percent. Should it rise to 8 per cent, prices may see a corresponding drop by 5 to 10 per cent, according to UOB Kay Hian research analyst, Vikrant Pandey.

One possible reason could be that the restrictions on loans might detract from potential investors from over-stretching themselves thus diminishing the number of home sales. While there is no expectation of a sudden drop in interest or home prices, industry analysts are considering the fact that Singaporeans are generally still rather prudent and as up to 10 per cent of borrowers are currently overstretched, the market may see a slight move southwards for the latter half of the year.

Corals at Keppel Bay.

Corals at Keppel Bay.

And with the slew of new properties these last couple of years, most of which will be completed within the next year or two,  a fall in property prices of up to 10 per cent could be imminent particularly in the mass market home sector. Though buyers in the high-end luxury property market may not be flocking in by numbers, they are usually more financially secure and have the means to hold on to their properties or the willingness to absorb the  extras brought on by stamp duties.

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?

One person to a home?

That might be the way Singapore’s property market goes in future. 6.9 million by 2030? Could the number of new homes be sufficient if this new trend continues?


More home owners are taking sole ownership of a property, to free up their spouse or family members for ownership of other properties whilst avoiding the additional stamp duties payable on the second and subsequent properties. The savings could be quite substantial, considering the new measures now require Singaporeans owning a second home to pay a 7 per cent ABSD (additional buyers stamp duty) and PRs (permanent residents) to pay 10 per cent.

Even families who currently have more than one name on the property are ‘decoupling’ or transferring their share of the property only one person so the rest are able to now purchase new properties without paying the additional buyers’ stamp duty. The 3 per cent standard stamp duty rate which comes with the transfer is however still applicable. How many properties would one family essentially own then? Is it going to be a case of landlord over tenants in the very near future?

KhattarWong managing partner Gurbachan Singh considers the recent cooling measures to be the ‘most radical’ since 1973, and a sign that the Government is keen to look after Singaporeans first. However there are still loopholes to be filled in and constrains to be released. The situation that occurs upon the inheritance of a property needs to be reconsidered as being levied up to 16 per cent ABSD on a property that one has inherited or is placed the executor of could hardly be fair, especially if special circumstances apply. Mr. Singh has said that should the response from IRAS not be satisfactory, they are willing to take the rulings to court.

Property developers discounts may be cut

If you’re waiting to see if the developer of your property of choice might dangle discounts to counter the recent cooling measures, you might have to reconsider. The authorities have caught on to property developers‘ tactics of offering discounts as a means to entice customers to buy new properties, especially since the cooling measures have taken a huge chunk out of the business.

But fear not, only the indirect discounts are under review by the Urban Redevelopment Authority. These mostly refer to the rebates and vouchers that the buyer receives only after purchasing the property. Since these are not reflected in the upfront price which the buyer pays, it may make the cooling measures seem ineffective, which also means URA’s quarterly price index based on caveats lodged might not be a true reflection of the market situation.

Property developers on the other hand tend to lean towards indirect discounts as this helps placate early buyers who may not be happy that they had gotten the raw end of the deal. Keeping the upfront price high also helps to keep prices high all around.

Other ways which developers have been trying to help buyers out are through the partial or full absorption of the Additional Buyers Stamp Duty (ABSD) which has been increased in the most recent round of measures. The frequency and fervency of this practice might be what the authorities are watching as it negates the effect of the property measures.

Another concern is also that the true value of the property needs to be conveyed truthfully to the home buyer, but with the discounts and cuts, it might not be the case and it might only confuse consumers. Not forgetting that home loans are based on the property value, thus might buyers be paying more in the end through bank loan interests for a higher priced property?

So are the cooling measures truly working? If it seems that discounts are offered more frequently, then it might be.

2013′s first round of Property Cooling Measures

Housing policies are getting a major shake-up as the Government throws in a bunch of new property cooling measures, for good measure? Perhaps we speak too early.

Are Mr. Khaw's comments reflective of the Ministry's stand?

But first, lets see what is brought to the table:

1. Additional Buyers’ Stamp Duty increase of 5 to 7 per cent
2. Additional Buyers’ Stamp Duty to be imposed on PRs buying their first home, and on Singaporeans buying their second.
3. For those with outstanding loans, the loan-to-value limit will be tighten by 10 to 20 per cent
4. If you are buying your second or subsequent home and need a loan, your minimum cash down payment will be now 25% instead of the previous 10%.
5. The percentage of monthly income that can be used to service your HDB home loan is now 30% if you borrow from the banks, and 35% if you borrow from HDB.
6. Stricter subletting rules for PRs means they are no longer allowed to sublet their entire flat.
7. PRs will not be allowed to own their HDB flat if they wish to purchase a private property. They will have to sell it before they buy their new private home.
8. A cap on Executive condominium units at 160 sq metres.
9. Dual-key units will only be eligible to multi-generational families
10. There’s now a seller’s stamp duty for industrial properties of 5% to 15% if you sell it within three years of purchase.

HDB flats

A whole lot to digest and a blow to property investors it seems. In general, those buying their first home will not be largely affected, though PRs will have to pay an additional buyers’ stamp duty even for their first home.

The numbers from Q4 of 2012 which indicated prices were hardly budging, and quite possibly continuing its rise, were the motivation behind the quick and huge move. Deputy Prime Minister Thaman Shanmugaratnam mentioned at a briefing last Friday, that the government has already been quite concerned over the “re-acceleration in prices in both the private market and the HDB resale market“.

The next two quarters may reveal the effects of these new rulings, though for the next couple of months, the market may see some slowdown. But as many may already find new properties within their affordability range, it could be simply a shift of priorities and options from one property category to another.