Business & Economy Property Premature to conclude effectiveness of property cooling measures, National Development Minister

Premature to conclude effectiveness of property cooling measures, National Development Minister




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The Minister for National Development said today that it was premature to say if the property cooling actions introduced on July 5 achieved its intended objectives.

Minister Lawrence Wong was responding to a parliamentary questions of:

  • whether the latest round of property cooling measures have achieved the intended objectives;
  • what is the rationale for tightening the loan-to-value (LTV) limits for first-time property buyers;
  • and what is the overall impact on the first-time property buyers in view of the latest cooling measures.

property cooling actionsThe Minister said:

“The property cooling measures implemented on 6 July 2018 are intended to moderate the residential property market cycle and keep price increases in line with economic fundamentals. Loan-to-Value (LTV) limits were tightened across all housing loans, including those taken by first-time buyers, as the price increases prior to the measures were broad-based across the market, reflecting demand from all types of buyers. However, we maintained Additional Buyer’s Stamp Duty (ABSD) rates for Singapore Citizens and Permanent Residents buying their first residential property.

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As the measures were only introduced recently, it is premature to conclude whether they have been effective. Nevertheless, there are early signs that the measures may have kept the pace of price increase in check. Based on URA’s latest flash estimate of the Property Price Index, prices increased by 0.5% in 3Q2018, compared to 3.9% and 3.4% in 1Q and 2Q2018 respectively.

The Government will continue to monitor trends in the property market, and adjust our policies as necessary, to maintain a stable and sustainable property market.”

The property cooling actions – higher additional buyer’s stamp duty (ABSD) and lower loan-to-value (LTV) limit – took the market by surprise as recent trends suggest that the private residential market is finding its own equilibrium: developers have been less active in the collective sale market, while new homes sales at some recent launches have moderated.

The introduction of these fresh property cooling actions a year into market recovery, after four years of decline, was aimed at calming the euphoria in the private residential sector.

Home prices had risen by 3.9% in Q1 2018, and another 3.4% in Q2 according to flash estimates. The price growth – which was tapered in the last quarter – was largely driven by the brighter economic outlook, pent-up housing demand and more positive market sentiment.

Property Price Index shows realty continues growing despite cooling measures

Colliers International said on the heels of the property cooling measures introduction that the fresh property cooling actions – the ninth round of property cooling initiatives since 2009 – will put a drag on home sales this year as the higher ABSD could curtail investment demand from both locals and foreigners, and the larger cash outlay required for down payment on homes weighs on buying interest.

The prominent real estate company said, the flurry of last minute deals done – estimated at 1,000 units from three project launches – The Stirling Residences, Park Colonial and Riverfront Residences – on the evening of July 05 to beat the ABSD deadline indicated that there is both liquidity and pent-up demand for units in the market.

It added that new home sales may decline significantly in the initial few months as the market take stock of the potential implications. The last two rounds of property cooling actions announced in January 2013 and June 2013 saw new home sales fall 65% to 712 units in February 2013 and 73% to 482 units in July 2013 respectively.

For the whole of 2018, Colliers International projects that new private home sales (excluding executive condominiums) could come in at 8,500-9,000 units – 15-20% lower than the 10,566 units shifted in 2017.

They expect developers to delay launches as they re-strategise after the fresh property cooling actions were implemented. From January to May 2018, developers have sold 3,434 new units based on caveats lodged.

Research: Private properties more affordable now than they were in 2013

Meanwhile, Colliers International expects home prices to likely hold steady from this point, after rising by 7.4% in the first six months of this year. With the increased tax on investors and foreign buyers, the demand base will likely shift towards first-timers. Offerings may need to be recalibrated to match their needs. Inventory may take a longer time to sell, but developers are unlikely to reduce prices in the near term given the land costs they have already committed.

Ms. Tricia Song, Head of Research for Singapore at Colliers International, said then: “Based on our analysis, the collective sales that have been concluded since 2016 could generate around 25,000 new homes from 2021 onwards. Coupled with the moderate Government land sales sites over the past two years, the upcoming supply of new units in the medium term does not look excessive as long as economic fundamentals remain sound. Given that developers have exercised more restraint in bidding for collective sale sites in recent months, the launch pipeline should remain fairly sustainable over the next 3-4 years, and we do not think developers necessarily need to embark on deep price cuts to sell units especially if the new launches are paced out evenly.”

Colliers International’s research found that private home supply completions will taper off sharply in 2018-2021 to an annual average of 8,104 units from the 2014-2017 annual average of 18,731 units, and the 10-year average of 12,948 units. While this number could rise sharply beyond 2022 due to the recent collective sale fever, it does not appear excessive if spread over a longer term. We expect annual average completions of 10,318 units over 2018-2022.

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