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Understanding the impact of the Singapore property cooling measures

Understanding the impact of the Singapore Property Cooling Measures

The government of Singapore recently introduced cooling measures. Consequently, the soaring prices of the private properties in the country have declined significantly. Till 2017, Singapore is expected to experience 7 rounds of these cooling measures. These measures include a framework of total debt servicing which limits the monthly debt repayments of the borrower to a maximum of 60% of the monthly income. As a result, buyers have started aiming for homes which are smaller in size and cost cheaper. One other significant measure that the property market experienced was the ABSD – Additional Buyer’s Stamp Duty.

ABSD is an additional amount of tax which is imposed on citizens of Singapore or permanent residents who are buying their second property and on foreign buyers as well. Currently, the ABSD tax that is applicable to foreigners is 15%! Consequently, the PPI which is the Property Price Index experienced a 4% decline in prices in the year 2014. It will experience a further decline in the next year.

Developers have constantly sent out repeated calls for clawing back these cooling measures, specifically the two major ones. However, the government of Singapore is keen on sustaining such a domestic market. This five-year campaign of the government to rein the value of the properties has caused a decline in the prices. Sales of houses were the lowest in August particularly because developers provided a lesser number of projects due to the cooling demands.

In the previous two years, the global economic index did not fare well at all. Additionally, because of the impending supply of units that remain unsold and due to the recent hike in the interest rate of Fed, prices of properties are expected to experience an even further decline. Macroeconomic factors including the slowdown of China and the sharp rise in the interest rate of Fed has led to an unwelcoming aftermath on the residential market of the country. The complete impact of these factors will be experienced fully during the next year.

The property price index by the URA has shown an unwavering decline in the prices of the properties that has stayed in a continuous flux. Over the last eight quarters, prices have decreased by around 8%, and these prices are expected to decrease further. Because of the decline in the selling prices of the properties, sellers that were hoping to get a good price for their houses are in a serious dilemma. On the other hand, buyers are overjoyed at the possibility of buying homes at a price which is below the value of the market.

Singapore 2016 2nd quarter Property Price Index for Residential Properties

Source: URA

Source: URA

Prices of landed properties declined by 1.5%, compared to the 1.1% decline in the previous quarter. Prices of non-landed properties decreased by 0.1%, compared to the 0.6% decline in the previous quarter.

Prices of non-landed properties in Outside Central Region (OCR) decreased by 0.5%, compared to the 1.3% decline previously. Prices of non-landed properties in Rest of Central Region (RCR) rose by 0.2% after remaining unchanged in the previous quarter. Prices of non-landed properties in Core Central Region (CCR) increased by 0.3%, after increasing 0.3% previously

Despite the problems that the property ecosystem of Singapore is facing, the demand for property in the country remains high. As a result, the government of Singapore will gradually filter out or even remove a few of the stricter aspects of the cooling measures. Consequently, prices will go through a much-needed great recovery phase.

For reference to Singapore Property Cooling Measures, please click HERE


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