Singapore Entrepreneur - Latest Property Cooling Measures

Ok. The Singapore government is really coming down hard this time on property speculation. Let us swallow and digest the facts here and analyse what are the possible consequences.

The overwhelming response from the latest launch at Loft@Holland, just before the news was released, evidently showed that the previous 3 rounds of cooling measures had not dampened the mood of property investors. It averagely attracted 3 keen buyers to 1 unit, which resulted in a fully sold project within 2 hours after balloting.

There was a knee jerk reaction from the market after the news release. Many buyers retracted from deals almost signed on the dotted line or even forfeited the option fees. They are expecting a fall in prices in the following months with the slew of tough changes.

For a $1M purchase of a private home, if it were to be a 2nd (or more) property, the maximum loan approved by bank would be 60%, or $600,000. This means that you have to fork out a minimum of $400,000 upfront in both CPF and cash. For middle income earners, this is a sheer amount not to be trifled with. If you intend to let go within a year after the purchase, the Seller's Stamp Duty (SSD) will be 16% of purchase price, which equates to $160,000. This means that you need sell at least 20% above your buying price just to break even, not forgetting other costs like Buyer's Stamp Duty, legal fees and bank early redemption charges.

For a small property investor like me, it is certainly coming on me from all corners. One thing for sure, I will be out of the game for now.

The new rules are certainly going to put a hard brake on price and sales volume. The mass to mid-level market private condominiums and landed properties are going to be the worst affected. For the following months to come, it will be a stage of tough standoff between buyers and sellers. Sellers have the ability to withhold their properties with their financial abilities. Buyers have cash but will hold on to see if prices start to fall further. Property developers, who are keen to letting go their new projects may start the ball rolling by offering perks to potential buyers. But since the government measures are slated, developers have already long factored in their costs and would unlikely compromise in their selling prices anytime soon. For the following months to come, prices are expected to be flat while transaction volumes coming down sharply.

Slowing sales volume in the private sector would likely have a trickle down effect on HDB sales. Cash-over-valuations (COV) would be expected to ease further while prices would continue to hold.

On the other end of the market, which comprises high end condominiums and landed properties, would be the least impacted from the measures. This sector, not restricted to foreign buyers, often attract sophisticated overseas investors with high net worth. Prices would likely continue to grow at a healthy level with a lot of money pumped into the Asian region. Comparatively, Singapore property prices are still lower compared to properties in cities like Hong Kong and Shanghai.

In summary, the Singapore government's agenda is to encourage first-time buyers or upgraders, weed out property speculators and invite foreign investments into the local market. Afterall, its primary interest is to protect the people from being blinded by low interest rates and ever increasing property prices, resulting in a property bubble burst. The consequence would be unimaginable.