How the Singapore Property Market is Doing After Dec 2021 Cooling Measures
In this article, we shall study how the Singapore Property Market is performing after December 2021 Cooling Measures. We are roughly two and a half months into the cooling measures andI’ll be sharing with you about these four things in which I research on.
The first we’ll be talking about is how is the market performance from the cooling measure till now and how have buyers been reacting to the market.
Secondly, I will be also be conducting some surveys and show results in which the buyers are thinking of buying for the next 12 months and I will also be looking at the HDB developer point of view and also the private developer point of view and your direction for the next 12 months.
1. Changes to ABSD after Dec 2021
In December 15th 2021 last year, the government comes in with several cooling measures so the first column you can see is it has the higher Additional Buyer Stamp Duty (ABSD) duty by the government to tax people who are buying second or more properties. If you are a first-time buyer it will not be affected to you.
Secondly, there is the increase of the total debt servicing ratio (TDSR) that people will be able to borrow less so instead of 60% of your income they will only be able to look at only 55% of your income when applying for a loan. Therefore people will be able to take lesser mortgages.
The third which is only applicable for HDB whereby there is a reduced loan to value ratio (LTV) whereby the ratio has been reduced from 90% to 85%. Which means when you want to buy a hdb unit you have to use a minimum of 15% cash plus CPF.
Lastly, developers’ ABSD has been increased from a 10% to 35% increase, which means more risk for them. If they don’t finish selling their projects in a stipulated time-frame, they will have to pay the 35% ABSD.
2. Property Market Performance Before and After Cooling Measures
The picture above shows the Property Price Index or Property Market Performance over the last 2 years, leading up to 2 months after the cooling measures.
The graph shows not only the property price index but also the volume transacted. Around the second quarter of 2020 that was during the circuit breaker occurs and you can see that these two months has the lowest number of transaction.
During the month of November 2021, you can see that the price reaches the highest, which is a steep jump. This cause the government to become worried and this cause a knee-jerk reaction as the government do not want prices to go up too fast. Hence they introduce the cooling measures the following month in December.
Personally, I feel that this knee-jerk reaction is over-impulsive as before the measures kick in, prices already start to fall before the cooling measures (December Data). The average per square foot was actually decreased from $1863 down to $1599.
In terms of volume transacted, from November to December, total volume just before the cooling measures kick in also shows a decrease, which means the market is already normalising itself. Volume decrease from 3043 in November, to 2172 in December, to 1586 in January and to 500 only in February. Although volume has dropped significantly, prices actually remains pretty consistent. There’s not much change at all even though there is an impact of the cooling measure.
What it means is people are able to hold up for high prices, there is not a need to desperate sell, hence the consistent pricing yet decrease in volume.
3. Buyer Sentiments Survey
A Property Ownership Aspiration Survey was conducted from Dec2021 to Jan2022. Over this 2 months, 1,148 ready buyers were surveyed. They spread across different age groups and also different economic profiles.
Watch the video for the full survey but below is the summary
- Over 60% of buyers feel that after the cooling measures, prices are expect to remain the same or a slight increase of 1-3%.
- Investors feel that the higher ABSD rates has the greatest impact on them.
- For homebuyers and upgraders, their 2 major concern are the tightening of TDSR, whereby they will be able to borrow less and the decrease in the housing supply. With fewer supply, they are face with lesser options in the market.
- Majority of HDB buyers main concern will be the tightening of LTV where they have to fork out more cash.
- Over 35% of respondents who intend to purchase a property in the next 12 months feel that the measures have no or little impact on them.
- Over 40% of respondents feel that due to the tighter TDSR, they will have to lower their budget and adjust their expectations.
- Only 10% feel that due to the cooling measures, they decide not to proceed with their purchase.
- The two main reason why people intend to purchase a property is upgrade and buy for future capital gain (32%) and majority (37%) intend to upgrade due to Working from Home and hence need a bigger space.
The above chart shows what people are looking for the most when they comes to purchase a private property. This may be important as when you sell your property, with more stronger factors, the property will be easier to sell.
The top 6 list of importance in order are:
- Having concierge services
- Walking distance to schools
- Having good design
- Near City Centre
- Having Smart technology in the house
- Strong upcoming growth
The least 3 importance are:
- Having spacious and functional layout
- Walking distance to MRT
- Having a master bedroom that can accommodate a King Size bed
4. HDB Market
HDB prices has still been going up. There’s no change in trend even though there is cooling measure on how much people can borrow for hdb. The reason why the HDB market is still going so strong is because the demand is more than supply. This is basically due to construction delay. Because there is a construction delay, there’ll be a longer completion period. And with a longer completion period, people cannot wait. Therefore they shift from BTO and go to the resale market .This causes a double digit growth of the HDB market for the last one year and this is really unsustainable over the long run. In fact, it is so unsustainable that in my previous video i actually predicted that a cooling measure will come in that will affect the HDB market.
In 2021 there’s over 250 units that is actually sold above 1 million which is far more than the normal value that is normally between 30 to 50 units per year. However in 2022, we expect the HDB price to slow down because due to cooling measure but it may slow down between five to eight percent which is still a very high unsustainable growth.
Therefore there will be a knee-jerk reaction by the government that HDB announced to ramp up supply of public housing over the next two years.
Some impacts we should see are
- More negotiations on price expectations
- Demand to remain robust due to construction delay
- Most sellers no hurry to sell. Price may continue to growth, albeit slower pace
5. Developers Direction
For new condominiums develop by private developers, the main changes of cooling measures is the increase of ABSD from 10% to 35%, with a 5% non remissible ABSD charges.
There is now a greater risk of developers if they can’t sell the unit hence more pressure on developers. A trend right now especially in the year 2022 is for the new upcoming launches, more developers are actually coming into joint ventures. This will mitigate the risk.
An example is an upcoming project call Piccadilly Grand. This project will be developed by two major developers; CDL and MCL Land. My opinion is this project is actually going to be very highly sought after. Check out my earlier video of the top five new launches for 2022 and this is one that I strongly recommend.
For current existing projects, there is going to be a squeeze on their profit. Hence, developers just basically want to sell off as fast as possible try to clear your hands of these properties such that they will not be incurred on the ABSD.
They may also push back their launches to re-strategize on their pricing and marketing campaign. Hence this is why in 2022 Chinese New Year period, there is only one launch that is the Arden where else normally Chinese New Period has always been a pretty hot period where the property market is pretty robust in the last few years.
We also expect higher price resistance for new land sales unless it is in a extremely good location. Developers will be bidding more carefully. There’ll be fewer bidders by the developers.
Lastly, for developments that is still under planning, there will be a change of focus. Developers are conducting surveys on the ground to understand the needs of buyers. For example, with the Work from Home due to the pandemic, people want more room or rather they want a separate study room. Hence from 2022 onwards I believe the shift will be more units all have a study in them. Developers will be telling the architect to make such such changes and will be able to sell these style units better so we see more units with a study room as compare to a normal three or four bedrooms.
6. Historical Trend
How does historical economic event and cooling measures been affecting Singapore Property Market? We will look at the historical trend.
The major cooling measures are in 2013, 2018 and 2021. Looking at the 2013 and 2018 cooling measures, there is no drop in pricing. Prices held strong as people are able to hold and wait. What you see is that the volume transacted decrease as people wait and see but it recover after roughly eight months later.
The only slight drop in pricing is during 2008 Lehman Brother Crisis, the 2015 slow economic growth, and 2020 Covid-19 lock down where there is several uncertainty. Following soon after, the market rebound pretty fast so I feel that prices are still increasing significantly.
The government do wants property price to go up at a sustainable pace, hence, historically when prices changes either up or down, government will tweak the measures to control the property pricing.