SINGAPORE, 16 December 2021 – The government has implemented the latest round of cooling measures targeted at the private residential and HDB resale markets, with effect from 16 December 2021. The package of measures – comprising higher Additional Buyer’s Stamp Duty (ABSD) rates, tighter Total Debt Servicing Ratio (TDSR) threshold, and tighter LTV limits for HDB loans – affects all categories of buyers. (Refer announcement here)

The latest announcement did not come as a surprise as the Singapore property market has been exuberant, with private residential and HDB resale volumes set to hit multi-year high in 2021. The robust home demand has been fuelled by several factors, including the low interest rate environment, ample liquidity in the market, attractive housing projects, and optimism arising from pandemic recovery, amongst others.

Mr Ismail Gafoor, CEO of PropNex Realty, said, “We are not surprised that the government has rolled out fresh cooling measures as the market has been lively this year, with very robust sales and firmer prices. Generally, this set of measures will encourage home buyers to be more prudent with their purchases, amid concerns about impending interest rate hikes. However, in our view, the 10 percentage-point increase in ABSD to 30% for foreigners appear to be too harsh, seeing that foreign buyers have not been very active in the market this year, owing to the travel restrictions. Looking at the caveats lodged, foreigners accounted for only about 4.5% of non-landed new private home sales this year – the majority of the demand was from Singaporeans.

“Certainly, there will be a softening in home sales in December with these new measures. Looking ahead, it is likely that developers may well take a breather and sit out the next one to two months to assess the impact of these measures on the market, and may decide to hold off launches till after the Lunar New Year. This will also give prospective buyers some time to understand how the measures will affect them and reassess their buying options,” Mr Gafoor added.

Ms Wong Siew Ying, Head of Research & Content, PropNex Realty, said, “The measures will certainly crimp the growth momentum in the property market in 2022. Given the hefty ABSD for foreigners, we expect the Core Central Region (CCR) to face more downward pressure, compared to the other sub-markets: Rest of Central Region (RCR) and Outside Central Region (OCR). We anticipate that some developers of CCR projects may trim average prices by 5 to 8% in 2022 in response to the measures, slowing demand from foreign buyers and the ample unsold supply in the CCR. Meanwhile, home values in RCR and OCR should remain resilient given tighter supply in these segments and as upgrading demand lend support to prices. In 2022, we expect overall private home prices to climb by 3 to 5%, broadly in line with the Singapore GDP forecast.”

PropNex has identified the potential winners and losers arising from the implementation of new cooling measures:

With the new measures, PropNex projects that new private home sales will likely be close to 13,000 units (ex. ECs) in 2021, and moderate to 9,000 to 10,000 units (ex. ECs) in 2022, supported by genuine demand from upgraders. In the first 11 months of 2021, developers have sold 12,467 new private homes (ex. ECs).

On the public housing front, PropNex does not expect the tighter LTV ratio (85%) for HDB loans to have a significant impact on demand as some buyers have tapped financing from the banks to fund their purchase.

The hike in ABSD may encourage more HDB flat owners who are looking to upgrade to a private property to sell their flat first before picking up a private home as they may not have sufficient funds for the upfront ABSD payment. Some HDB upgraders may also take a wait-and-see approach over the next couple of months to understand the impact of the measures on the private property market before making the next move.

PropNex expects HDB resale volume to trend close to 30,000 units in 2021, and could maintain at this level in 2022 – driven by factors such as delays in construction of new homes, generous housing grants for resale flats, and affordability of public housing. HDB resale prices may well rise at a slower pace of between 6 and 8% in 2022, as the buoyant sentiment in the overall property market moderates on the back of the new measures.