Have Singapore’s property-cooling methods turned it cold?

Since 2009, the Singapore government has introduced a number of measures to lower the record property prices, including a cap on repayment costs to 60% of a borrower’s monthly income and higher Stamp Duties.

These measures have been successful, with house values dropping for a ninth quarter in the last three months of 2015. This was the longest losing streak in 17 years; and last year's sales are set to be the lowest in seven years. Despite this, Singapore still remains Asia's second-most expensive luxury residential property market after Hong Kong.

Outwardly, there seems no likelihood of the Singapore Government lifting any of these measures and it is unlikely any such measure will happen until late in 2016. Even if that happened, there would always be the risk of the property market rapidly overheating again and so any measures would have to be gradual in nature.

Another factor which has caused the decline is a doubling of HDB prices since 2005. This meant that, historically, HDB owners could sell their units at high prices and were more inclined to move into a privately owned property. The HDB Resale Price Index (RPI) has also been in decline (although the rate of decline has slowed over the last two quarters), so this has had the reverse effect: HDB owners have not been able to receive the higher prices and have subsequently been less inclined to move into privately owned accommodation.

This has been exacerbated by the large number of  upcoming completions putting further pressure on both property prices and rentals, especially coupled with slower-than-expected population growth as the government continues to be tight on the inflow of foreigners into Singapore.

Based on URA data, there are close to 58,000 units of private residential properties to be completed in the next few years. Looking at the breakdown of supply, 2016 will see completions of over 22,000 units per year, followed by over 15,000 units in 2017: almost twice the yearly average of units per year between 1996 and 2012!

Lastly, the Singapore property market has always been closely correlated to the Singapore domestic stock market. That, in turn, is largely affected by economic data from China. Should the situation in China worsen (see our other article ‘China’s Woes’), this will have a further, negative, knock-on effect on a property market that is already under pressure.