Singapore residential market: post-cooling measures

January 17, 2019 / By  

The biggest disruption to the Singapore residential property market in 2018 was ironically not technological advancement but government intervention.

On 5 July 2018, the government announced the raising of Additional Buyer’s Stamp Duty and the tightening of Loan-to-Value limits on residential property purchases with effect from the next day, to cool the property market and keep price increases in line with economic fundamentals.

That night, homebuyers rushed to showflats to make their purchases to avoid being caught by the new rules. Sales activity were concentrated in three new developments whose launches were brought forward: Riverfront Residences, Park Colonial and Stirling Residences. Total sales of non-landed private residential properties reached almost 1,000 units in just one day, an unprecedented level.

Figure 1: Daily Transaction Volume of Non-Landed Private Residential Units in 2018
Source: JLL Research

Underlying demand for residential properties still healthy

In the immediate aftermath of the measures, transactions volume of private residential units tumbled as homebuyers stepped back to evaluate their financial implications. However, developers did not take long to return to the market. Daintree Residence was the first to test the market with their launch in end-July. The response was encouraging, indicating healthy underlying demand for residential properties. This led other developers to line the market with their new projects.

Developers chose to roll out some of their launches in 2H18 rather than withhold them until 2019 as they wanted to space out the marketing of their projects, bearing in mind the significant launch pipeline arising from the numerous development sites acquired between 2017 and 1H18.

New launches helped to prop up transaction activities. While resale transactions in the post-cooling measure period between July 6 and December 31 almost halved that in the preceding period from January 1 to July 5, developer sale volume saw only a 25% drop over the same period. November 2018 even marked the strongest monthly developers’ launch and sales figures in 2018 (disregarding the July abnormality).

The hearty sales volume can be attributed to developers being more realistic in their pricing, with some offering early bird discounts to entice buyers. Buyers are also coming to terms with the cooling measures. Given Singapore’s attraction as a safe investment haven with competitive prices as compared to other developed countries like Hong Kong and Australia that also charge high stamp duties on foreign purchasers, homebuyers continue to see Singapore as a compelling investment destination.

Price-wise, the new set of measures slowed price growth in the private home market and eventually put a brake on a price recovery that lasted for only five quarters. Nonetheless, for the whole of 2018, prices still recorded a rise of 7.9%, up from the 1.1% increase in 2017.

Outlook for 2019

In 2019, an estimated 10,000 to 12,000 new private homes could be placed on the market, higher than the 9,000 units launched in 2018. Almost half of the new projects will be small-to-medium sized projects in the prime districts 9, 10 and 11 as well as the East Coast area.

With the private residential sales market still restrained by the cooling measures, the significant launch pipeline coupled with an expected slowdown in the Singapore economy could mean that developers need to step-up to meet these challenges in the new year.

Potential Launches of Non-Landed Private Residential Units (exclude EC)
Source: OpenStreetMap, Esri, JLL Research

Table 1: Mega-sized Projects in the Launch Pipeline
Source: JLL Research

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