Singapore's sizzling property market, once a red-hot investment haven, is beginning to feel the chill.
April 2023 saw the government revising Additional Buyer’s Stamp Duty (ABSD) rates as a “pre-emptive measure” to dampen both local and foreign investment demand, alleviating the burden of Singaporeans who are seeking to buy property for their own stay. ABSD rates for Singapore Citizens have increased from 17 to 20 per cent for those buying their second property, and 25 to 30 per cent for those buying their third. For foreigners, ABSD rates have doubled from 30 to 60 per cent for the purchase of any residential property.
These cooling measures, coupled with a high interest rate environment, have indeed prompted investors to hit the brakes on their purchases, especially among foreigners. According to the Urban Redevelopment Authority, there was a 23 per cent quarter-on-quarter drop in private property purchases by foreign buyers in Q2 2023.
Market staying cool, not going cold
But this in no way means that Singapore’s private housing market is on the decline, said Dr Lee Nai Jia, who heads real estate intelligence, data and software solutions at PropertyGuru.
“The cooling measures have a stabilising effect on the market, as foreign buyers and investors pivoted to other assets. Price growth has also moderated, making housing more accessible to first-time buyers and upgraders.”
While the measures have curbed foreign investment demand, domestic demand remains robust, with Singapore Citizens and Permanent Residents who are first-time buyers being the key drivers.
Our Singapore Property Market Report Q3 2023 discovered a new trend in which prospective buyers are willing to pay higher prices for new condominium launches in choice locations outside the prime districts. Some new projects have sold more than half their units over a single weekend. For instance, Tembusu Grand, a 99-year leasehold project located in Tanjong Katong, outside of the prime Core Central Region (CCR), sold 340 out of its 638 units during its opening weekend in early April.
This trend persisted despite the hike in median price per square foot (psf) for new condominiums, which increased by over 30 per cent from S$1,981 psf to S$2,586 psf from Q1 2022 to Q1 2023,signalling a strong desire for new homes even at higher price points. To be sure, not all new launches demonstrated robust sales. Transactions on the weekend preceding the start of the Hungry Ghost month dropped to a new low – across three projects with a total of 507 units, only 53 were sold.
At the same time, to complement property cooling measures, the government is turning up the heat on supply and releasing more land parcels for sale, which will likely have a stabilising effect on prices. The Confirmed List supply of private housing in the Government Land Sales (GLS) programme has been increased by 26 per cent, bringing supply to around 9,250 units in 2023 – the highest in a decade.
Altogether, this injection will bring the total supply of private housing up to about 63,500 units to meet strong local demand.
To sweeten the deal for aspiring buyers, developers are also expected to dangle discounts as well as enhance their offerings – such as by improving on their amenities.
Dr Tan Tee Khoon, PropertyGuru’s Country Manager for Singapore, said with the economic uncertainty around the Singapore property market, coupled with the high interest rate environment, “the signs of demand abating were written on the wall when we entered Q3 2023.”
He expects property seekers to continue to recalibrate their purchases to buffer against possible financial impact.
“Save for major new condo launches that satisfy three main criteria – proximity to choice schools, walking distance to MRT stations, and being in mature neighbourhood enclaves with readily available amenities – we expect the trend of uneven performance in the private residential market to persist into Q4 2023,” he said.