On 29 September 2022, close to midnight, the government sprung on us another round of property cooling measures. This is the first time multiple rounds of property curbs have been implemented in such a short period – this announcement comes less than a year after the previous round in December 2021. However, given the pace at which property prices and transaction volumes have been soaring, this was expected.
Last year, Paul Wee, Vice President of PropertyGuru Finance, identified that the likely trigger for the cooling measures (in December 2021) was the increase in the number of million-dollar HDB flat transactions. “The HDB property market underpins the whole residential property market in Singapore. That’s why the government started with reduced TDSR and lower LTV for HDB-financed loans,” he said.
Despite the new curbs put in place on December 2021 – and not to mention, the rising interest rates – the HDB resale market continues to be bullish, setting new price records every other month. From January to August 2022, there were 231 HDB flats that changed hands for $1 million or more. As such, it is no surprise that the new measures will have the largest impact on HDB buyers in the market.
Impact of the New Property Cooling Measures (Sep 2022)
Here’s a summary of the measures:
With every round of new property curbs, a knee-jerk reaction and slowdown in the market is expected in the immediate term. This happens as buyers in the market take some time to digest the new regulations, evaluate how they are affected, and figure out their next best step.
In the short term, the market will cool.
“We anticipate that prospective buyers will likely take longer to commit to home purchases, translating to a slowdown in sales as the negotiation of prices and matching of buyers takes longer,” said Dr. Tan Tee Khoon, Country Manager of PropertyGuru Singapore.
HDB resale flat prices and the high-quantum transactions above $1 million are also expected to slow down, thanks to the increased wait-out period and tighter financial restriction affecting this group. According to Paul, downgraders from private property are likely to be behind many million-dollar HDB resale flat transactions. With the new measures in place, they may turn to the private resale market for smaller units or turn to the rental market during the new 15-month wait.
Demand may flow into the rental segment.
The possibility of further driving the rental market is an exciting one. Property rental prices are at record highs and are expected to continue trending upwards thanks to ongoing construction delays and the reopening of borders to foreigners.
“Those in need of accommodation (for example, due to recent en bloc sales) may resort to leasing or purchasing a private property in the secondary market. This may bolster rents but how much more depends on future demand for lease,” explained Dr. Tan.
These measures are unlikely to impact the high-end market.
These new measures are unlikely to affect buyers in the luxury and high-end market who have sufficient cash and/or capital. “The impact on the high-end market will be limited. The slowing of sales is likely to be felt on mass market condominium projects that rely on demand from HDB upgraders,” said Dr. Lee.
This is quite a big group, considering that over 31,000 HDB flats are expected to fulfil their minimum occupation period (MOP) this year. Those hoping to cash out on their flats will now have to think twice about upgrading to a larger HDB resale flat or private property.
What Can We Expect in 2023 and Beyond?
“The impact of the measures in the middle to long term is likely to be dwarfed by the volatile global economic conditions in 2023 and beyond. Higher interest rate hikes and recessionary pressure will lead to more caution in discretionary spending and purchasing of homes,” said Dr. Tan.
He added that for foreign buyers, these cooling measures may boost confidence among those with strong wealth preservation motives, as it suggests that Singapore’s residential market is on a sustainable path of growth.
Chat with your dedicated Mortgage Specialist from PropertyGuru Finance to find out how these cooling measures will affect your clients and their property financing, so you can better advise them and find out more about our latest giveaways!
At PropertyGuru, we’ll see you home.
Till next time! 😊