Cooling measures to curb demand for landed homes

Buyers wait on the sidelines as new curbs could boost home prices above $3m.

Despite the introduction of property cooling measures, home prices still climbed by 3.4% in the second quarter of 2018. However, analysts evaluated that prices would stabilise in the coming quarters as both buyers and developers would opt to wait and see the effect of the property curbs.

Colliers International head of research for Singapore Tricia Song noted that home values picked up rapidly in the first half of 2018 — up by a cumulative 7.4% — driven by growing market confidence, a spate of new launches and healthy housing demand.

“With the cooling measures in place, it is unlikely that private residential prices will continue to increase at the existing pace,” said Lee Nai Jia, senior director & head, Research, Knight Frank Singapore. “Sales are likely to be slower as more buyers, especially those buying a second home to invest, are likely to wait on the sidelines.”

Song concurred with Lee and said, “The new measures are expected to dampen home sales as the higher additional buyer’s stamp duty (ABSD) could curtail investment demand from both locals and foreigners, and the lower loan-to-value (LTV) limits could also weigh on buying interest.”

She also raised that Singapore’s landed residential segment should expect a slowdown from the cooling measures. She said, “The cooling measures will likely slow down demand in the landed segment, given the absolute quantum is usually large (over $3m), and the 5ppt increase in ABSD (for investment properties) and 5ppt decrease in LTV could mean a 10% incremental cash outlay.”

Upgraders would also need to factor in more time if they have to sell their existing property to avoid the incremental ABSD, she added.

Still, for OrangeTee & Tie head of research & consultancy Christine Sun, the coming months should continue to see a steady stream of new projects being launched in the market. “Although new launch prices may now be slightly lower than expected, we may still observe benchmark prices in selected locations, as some developers have acquired land parcels at high prices and are probably not willing to sell their units at a loss,” she said.

According to Huttons Asia’s head of research Lee Sze Teck, some launches that buyers can look forward to are The Tre Ver, Jadescape, Parc Esta, Arena Residences and Mayfair Collection. “The cooling measures have seen developers moderating their price expectations for new launches and created a window of opportunity for buyers to enter the market,” he added.

“Whilst some developers may choose to hold back their launches to observe the market performance, others are pressing ahead by rolling out different discount schemes and employing more sales agencies to reach out to more potential buyers,” Sun added. “The upcoming launch of The Tre Ver has already employed six marketing agencies for their project.”

PropNex Realty CEO Ismail Gafoor noted that buyers and investors might start to adapt a “wait and see” attitude to gauge the effects of the measures. At recent launches, developers are also adjusting their development prices sensitively with some offering discounts of up to 10%, factoring in the ABSD increase that their buyers will incur. These will indirectly correlate to the price index movements in the coming quarters.”

Lee also said that buyers will still purchase if the project offers a value proposition. “Besides identifying projects with quality finishes and great design, buyers will be seeking homes near natural features such as rivers and natural parks,” he added.