Did the Government intervene too early in Singapore’s private housing market?

Days after the release of Urban Redevelopment Authority’s flash estimates, the Government announced a new round of cooling measures, which caught many in the housing market by surprise.

Authorities might have been right in principle to impose these harsh cooling measures, amidst a private property market heating up. The private housing market experienced an inflexion in prices last year after 15 consecutive quarters of decline since fourth quarter of 2013.

In contrast to the gradual recovery in 2017, 2018 has seen a strong price growth momentum. Private property prices increased by 9.1 per cent in the second quarter of 2018.

Compared to the cumulative run-up of 62.2 per cent in private property prices from the second quarter of 2009 to the peak in 2013, this increase does not seem alarming. However, it should be noted that prices in 2017 rebounded from a relatively high base.

Housing price levels are also just 3 per cent short of the 2013 peak. Transaction volume also picked up as developers ramped up en bloc sales to quell pent-up demand.

But the timing and intensity of the latest interventions have been met with raised eyebrows. One analyst likens it to using “a sledgehammer to kill a fly”. The Real Estate Developers’ Association of Singapore describes the Government’s move as “tough” and “harsh”.

Real estate developers also assess that since the market has only started to show signs of improvement, there is no basis for the Government to intervene at such an early stage.

To be fair, the Government’s interventions do not come without warning. A large volume of en bloc sales has been completed at record-breaking prices in 2016 and 2017, with S$8.8 billion worth of transactions reported in the first half of this year.

These en bloc sites could be redeveloped into approximately 20,000 new private homes, doubling the number of new units in the next two years, according to the Monetary Authority of Singapore.

This has led to the Government’s increasing concerns about rising vacancy rates. If demand is not robust enough to match a bumper supply, there may be massive downward pressure on housing prices and rental.


How will the recent round of cooling measures, coupled with the earlier revision to the Buyer’s Stamp Duty (BSD), add to the costs of private housing purchases in Singapore?

First-time Singaporean buyers are only affected by the additional 1 per cent BSD, if they buy a private house of above S$1 million.

Assuming a second private condominium of S$1.5 million purchased for investment purposes after the July 2018 round of changes to the Additional Buyer’s Stamp Duty (ABSD), Singapore citizens would have to pay S$180,000 in ABSD. This figure is S$225,000 and S$300,000 for Permanent Residents (PRs) and foreigners respectively.

Coupled with valuation, legal fees and minimum downpayments, a Singaporean buyer is expected to fork out about S$600,000 at the outset. The figure is approximately S$650,000 for PRs and S$720,000 for foreigners – a huge proportion of the purchase price.

For a smaller second condominium of S$1 million, Singaporean citizens will have to fork out an upfront payment amounting to S$397,600. For a S$2 million house, this figure amounts to slightly more than S$800,000.


If it sounds like a lot, we should keep in mind that many existing measures have not deterred a huge number of wealthy property owners.

The Ministry of National Development (MND) revealed in February that a total of 20,000 homeowners in Singapore own between three to 10 private residential properties in Singapore, with 15 per cent of them also owning a HDB flat.

These new ABSD measures will force these property buyers to re-evaluate whether buying second or more properties is still a feasible investment option in land-scarce Singapore.

Singapore citizens would need their second investment property price to appreciate by approximately 15 per cent, just to recover the ABSD and BSD. This figure is 23 per cent for foreigners.

There are other Asian cities which have already surpassed our current stamp duty rates. Foreigners looking to buy their second property in Hong Kong, for example, face a whopping 30 per cent in upfront stamp duties.

On top of this, Hong Kong is proposing a vacancy tax at 200 per cent of a newly built unit’s estimated annual rental value to discourage market speculators from buying and holding onto properties while waiting for their values to rise.

The immediate effects have been adverse. The sudden announcement of the new ABSD and loan-to-value ratio rules have triggered knee-jerk reactions from buyers, who flocked to showflats to place their option to purchase. More than 1,000 units of private condominiums were snatched up by panic buyers before the midnight deadline.

Shares of property developers and real estate agencies reacted most instantaneously in the first days of the new rules. Share prices dropped with some hitting record lows.


The Government’s actions come at a time when it is necessary to keep housing affordability in check. The new cooling measures are expected to adversely affect purchasing activities by investors and speculators in the private housing markets.

If those who are not willing to pay the additional ABSD choose to stay on the sidelines, the market could enter into a cooling period with little sale activities.

In a pessimistic scenario where the demand is dampened, developers may have to revise their prices to move sales.

Developers who plan to acquire new en bloc sites, and have properties in their portfolio – yet to be launched for sale – will suffer a double whammy. On top of the extra 5 per cent they will have to pay for acquiring the private residential projects, they may also face a dwindling pool of potential buyers in upcoming launches.

Developers may be hoping for an optimistic scenario in which unconstrained, undeterred buyers, including foreign investors, continue to bet on the long-term prospects of private residential properties in Singapore.


At first glance, the Government’s measures today may have muted the steady progress of the real estate market in the short-run.

Upon closer scrutiny, it may be more prudent to see them as preventive measures imposed ahead of time to prevent the property market from overheating, with adverse consequences for the economy.

With the rapid buying and selling of private properties, the en bloc frenzy and residential land sales, the last to suffer in the speculative foray will be individuals who over-commit and stretch beyond their means.

The Government is obligated to act quickly to protect these individuals from being overly exposed to the risks in an overzealous market.

Such measures may ensure that in the long-run, Singapore continues to enjoy a stable and sustainable property market.

By Sing Tien Foo – the Director and Tang Li Xuan Amanda – a Research Assistant at the Institute of Real Estate Studies, National University of Singapore.

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