Property Cooling: What’s hot and what’s not

Summary:

  • What are the latest rounds of property cooling measures the government has introduced?
  • How will they affect the various groups of people living in Singapore?

Property prices have always been a hot topic in Singapore.

After all, a simple understanding of the economics of demand and supply will explain why housing prices have skyrocketed so quickly.

This was a wild scenario, maybe just one off, but it’s still worth a study. I’m talking about the resale prices of the executive maisonette in Bishan ($980,000) and an executive unit in Queenstown ($1 million’s the record for now!). I doubt that these prices will persist as these were very prime locations where (stupid?) buyers thought it was worth the price. Personally, I find it hard to believe anyone would pay so much money for owning less than 2000 square feet of space.

Nevertheless, the latest tightening measures (the most extensive yet) were announced to further moderate housing prices and put in place some obstacles for those who treat our property market like their own personal investment playground.

Allow me to give my two cents’ worth on some of the policies that particularly stood out for me (you can see the full list of measures here):

 

1.     Sales of new dual-key Executive Condominiums (EC) units will be restricted to multi-generational families only

The main target audience when these units were first launched was in fact those who wanted to live in close proximity to their parents while also having their personal space. But of course, it was an entirely different story when buyers found out about the rental potential of the dual-key EC (since the studio apartment is considered a room, not an entire unit).

So to have this rule actually enforced isn’t a bad thing, but my concerns are:

  • One of the eligibility criteria an applicant has to meet is a maximum household income of S$12,000, which can be slightly tricky when you factor in your parents’ income (for those who have yet to hit retirement age). Consider my family makeup with my parents, my sister’s family of 3 (husband and baby) and me: with 4 working adults, our household income definitely way exceeds the income ceiling. We fall into the grey area (what we like to term as the middle-class trough) where a flat would not suffice to fit us all, but it’s a financial stretch gunning for a private landed property.
  • Since this rule essentially closes off the option of a dual-key EC to those who used to be eligible – and also taking into account a longer wait for buyers due to the newly implemented 15 months waiting period for sales launch – would the supply of dual-key EC fall as developers get more wary of its demand?

 

2.     Recalibrated measures on property ownership for investments

There is also a string of measures aimed at making property investments less attractive:

–        Increased Additional Buyer’s Stamp Duty (ABSD) rates (table below courtesy of IRAS)

 

Profile of buyer ABSD rates (old)+ from 8 Dec 2011 to 11 Jan 2013 ABSD rates (new)+ from 12 Jan 2013
Foreign Residents (FR) and entities buying residential property 10% 15%
Singapore Permanent Residents (SPR) buying 1st residential property Nil 5%
SPR buying second and subsequent residential property 3% 10%
Singapore Citizens (SC) buying the first residential property Nil Nil
SC buying second residential property Nil 7%
SC buying the third and subsequent residential property 3% 10%

–        Tighter Loan-to-Value limits for individuals with at least one outstanding loan

–        Increased minimum cash down payment to 25% for those applying for a second or subsequent housing loan

As a potential first-time home buyer, I welcome the above changes as they will, to some degree, dampen speculative buying – during the period they are in effect that is: these are temporary measures and will be reviewed in time.

On the other hand (and perhaps I’m over thinking a little here), we can’t rule out the possibility of investors who would pass off these additional costs to their tenants (for those purchasing housing units for rental purposes). In this case, those looking to rent will no doubt receive the short end of the stick.

 

3.      PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore

This makes absolute sense – public housing should be kept affordable and available to the general public, and not used for investment purposes. In fact, I strongly feel that this should be expanded to include all owners of HDB flats regardless of nationalities!

I suppose people don’t typically question a restriction that’s to their favour, but it puzzles me as to why Singaporeans are allowed to purchase private residential properties yet keep their HDB flats while PRs have been revoked of this right.

If the government’s aim is to cool the HDB resale market, then I think it may be more impactful to remove all dual-ownerships to increase the supply of HDB flats in the resale market.

 

For what it’s worth, if the property situation still doesn’t see an improvement, perhaps we can one day become a real-estate tycoon like those folks in Hong Kong!

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AlvinLee

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1 Comment

  • I think the market should have room for more cooling measures as all the investors from the western world comes to buy property in singapore to preserve their value. What i would suggest is for 2nd property ASBD to be at least 50% and ban bank loans for the third private property

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