Market stand-off: Buyers, sellers keep watch on impact of curbs

Market stand-off: Buyers, sellers keep watch on impact of curbs

Grace Leong
Senior Business Correspondent

15 January 2022

SINGAPORE - The latest cooling measures may have unnerved many buyers, but PropNex agents Leng Kar Yee and Joy Shi have been clocking condominium sales at projects like Normanton Park and Verdale.

Many of their clients are failed Build-To-Order flat buyers, Housing Board upgraders or private home owners who sold their first private property before buying another and are therefore not subject to additional buyer's stamp duty (ABSD).

Some foreigners - now subject to ABSD rates of 30 per cent, up from 20 per cent - are also not deterred by the latest property curbs and are willing to shell out for big-ticket homes.

Two of the nine units sold at City Developments' (CDL) CanningHill Piers between Dec 16 last year and Tuesday were bought by foreigners willing to pay the higher ABSD, said a CDL spokesman.

A Hong Kong couple who had relocated to Singapore during the pandemic paid nearly $1 million in ABSD on a $3.3 million five-bedroom penthouse they bought earlier this month at Verdale in Bukit Timah, said PropNex agent Jaeson Lin.

However, overall transaction volumes from new launches and existing projects have slowed in the weeks since the new property curbs kicked in on Dec 16 last year.

Analysts say it is too early to tell if the cooling measures are taking their toll or if the lull is due to more people taking year-end breaks overseas because of the addition of more vaccinated travel lanes.

CBRE notes that new private home sales dipped to 281 units from Dec 16 to Dec 31, compared with 431 units sold from Dec 1 to Dec 15.

New home sales last month fell to 712 units from 1,232 in December 2020, and are down from 1,554 last November, CBRE said.

The latest round of curbs included higher ABSD rates - up by 5 percentage points to 15 percentage points - for all individuals and entities, except Singapore citizens and permanent residents buying their first residential property.

The ABSD rate has jumped from 12 per cent to 17 per cent for Singaporeans buying their second residential property, and from 15 per cent to 25 per cent for those buying their third and subsequent properties.

Permanent residents buying their second residential property pay an ABSD rate of 25 per cent, up from 15 per cent. If they are buying their third and subsequent properties, the rate jumps from 15 per cent to 30 per cent.

"The increased ABSD rates affect those buying second and subsequent properties for investment purposes and for recurring rental income much more severely than those buying their sole home for owner occupation," said Mr Leonard Tay, head of research at Knight Frank Singapore.

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The total debt servicing ratio threshold was also tightened, from 60 per cent to 55 per cent, and the loan-to-value limit for HDB loans went from 90 per cent to 85 per cent. This means buyers will have to be more prudent.

"Someone earning $15,000 per month who intended to take a 25-year loan will now have his eligibility quantum lowered to about $1.65 million, compared with $1.8 million previously," OrangeTee & Tie chief executive Steven Tan said.

At the same time, many sellers are not budging as they have holding power, and are concerned about the replacement cost of their next home, he said.

While most developers do not typically launch new projects during the pre-Chinese New Year period, some analysts believe they will release new units after the festive period because of limited new home supply and strong demand underpinned by Singapore's continued economic recovery.

More than 30 new private housing projects, including executive condominiums (ECs) - potentially 8,000 to 9,000 new homes - could be launched for sale this year, with 14 slated for the first half, PropNex Realty chief executive Ismail Gafoor said.

There were 27 private residential projects, including three EC developments, launched last year.

But Mr Ong Teck Hui, senior director of research and consultancy at JLL Singapore, said some developers may delay or scale down launches in the early part of the year as they try to size up the market. The number of "launches this year could be 10 per cent to 15 per cent lower than last year", he said.

There is also less pressure on developers to cut prices to move stock, especially for projects that have lower unsold inventory and a high take-up rate, analysts say.

Case in point: Normanton Park is raising prices by 2 per cent for all unit types with effect from Feb 5, according to Ms Leng of PropNex. The 1,862-unit leasehold condominium project has sold 1,494 units as at Jan 2, based on the Urban Redevelopment Authority's (URA) Realis data.

But there may be more promotions offered for upcoming new launches, and prices are "likely to be lower than originally intended before the new cooling measures", Mr Ong said.

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Mr Wong Xian Yang, Cushman & Wakefield's head of research, Singapore, added: "Though some may offer incentives, perhaps around 5 per cent discount to offset the higher ABSD for Singaporeans buying their second property, developers would be constrained by higher land and construction costs."

Development risks have further heightened with the remittable ABSD rate for developers jacked up from 25 per cent to 35 per cent, so developers may prefer to buy sites via the Government Land Sales (GLS) programme - a more straightforward process for acquisition - rather than undergo the lengthy collective sale process, analysts say.

This especially so as a developer who fails to complete the project and sell all its units within five years of acquiring the site will then have to pay 35 per cent ABSD with interest. On top of that, developers are still subject to a 5 per cent non-remittable ABSD.

Most of last year's collective sales were of smaller land parcels, a trend that should continue this year as developers seek to mitigate risk by seeking modest-sized sites, noted Ms Chia Mein Mein, head of capital markets (land and collective sale) at Knight Frank Singapore.

She said that much of the sales activity over the past 18 months was of confirmed list sites in the GLS programme, while reserve list sites, with the exception of the sale of the Marina View white site, were largely dormant.

But developers may start looking at sites on the GLS reserve list this year, particularly those where 600 units or fewer can be built, Ms Chia said.

Meanwhile, foreign buyers are still willing to invest in private property, including the luxury non-landed market, given Singapore's safe and stable environment.

"Despite the substantial increase in ABSD rates for foreigners, Singapore does not yet have a wealth tax or capital gains tax," said Knight Frank's Mr Tay.

Moreover, URA flash estimates showed that prices in prime districts rose just 3.7 per cent last year, compared with a 16.9 per cent jump in prices in the city fringe and an 8.4 per cent increase in the suburbs.

Thus, there is continued interest in luxury property from affluent buyers.

"In view of the new cooling measures, some developers are also willing to give them discounts, which could see the net price being similar to what was seen pre-measures," said Ms Tricia Song, CBRE's head of research for South-east Asia.

On the public housing front, the HDB resale market is expected to be less affected by the cooling measures as these buyers typically purchase an HDB resale flat as their first property and thus do not incur any ABSD.

In announcing the cooling measures last month, National Development Minister Desmond Lee noted that HDB resale flat prices have increased sharply after a six-year decline, rising by about 15 per cent since the first quarter of last year.

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While the house price-to-income ratio - which is used to benchmark housing affordability - in the HDB resale market is still below historical averages for now, it is on a "clear upward trend", he said.

One of the measures that may affect the HDB resale market is the tightening of the loan-to-value limit for housing loans from HDB from 90 per cent to 85 per cent.

This means that the maximum amount potential buyers can borrow from HDB is now capped at 85 per cent of the flat price.

Professor Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore, said this may prompt sellers to set more realistic asking prices to close a deal quickly.

He said the gap between sellers' asking prices and what buyers are willing to pay is expected to narrow this year, although demand in the HDB resale market is likely to remain healthy owing to the larger pool of potential buyers.

Last month's flash estimates showed that HDB resale price growth was at a slower pace of 0.8 per cent compared with the month before, but many analysts said it may take a few months for any possible price adjustments to be reflected in monthly figures.

A ramp-up in Build-To-Order flat supply may also cool off the HDB resale market, although the effects will not be as immediate, as the new flats require time to be built.

HDB has committed to launch up to 23,000 Build-To-Order flats per year this year and next year to meet the strong demand for public housing.

Prof Sing said the increased Build-To-Order supply is likely to shift demand only from those who are willing to wait for a new flat, while those who have immediate housing needs will still turn to the HDB resale market.

https://www.straitstimes.com/singapo...mpact-of-curbs