Late at night on 15 December 2021, the government shocked property buyers and sellers by suddenly announcing a new raft of property cooling measures, to be implemented less than an hour later.
Although the property market had been heating up over the past year, notably with a record number of million-dollar HDB flat transacted in 2021, the suddenness of the announcement took buyers and sellers by surprise.
The measures include an increase in the Additional Buyer’s Stamp Duty (ABSD), lower Loan-to-Value (LTV) limits and a tighter Total Debt Servicing Ratio (TDSR) threshold, summarised as follows:
|
Cooling measures (effective from 16 Dec 2021) |
Description |
|
Higher ABSD |
Raised for Singapore citizens and PRs buying second and subsequent property, as well as for all foreign buyers and entities |
|
Lower LTV limit |
Lowered from 90% to 85% for HDB loans |
|
Tighter TDSR threshold |
Lowered from 60% to 55% |
Related article: Property Cooling Measures (Dec 2021): How the New TDSR Affects You
So far, the property cooling measures have been felt across the industry, with the ability of developers to take on new projects, especially large-scale ones, being constrained and new home sales figures dropping in December 2021 and January 2022.
But how do Singaporeans feel about the new property cooling measures? PropertyGuru’s Consumer Sentiment Study H1 2022, which measures Singaporeans’ sentiments about the property market, property prices and relevant government regulations, found ambivalence about whether or not to welcome the new measures.
Property Cooling Measures (Dec 2021): Yay or Nay?
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According to the study, more than half (52%) of Singaporeans agreed with the latest raft of cooling measures, a satisfaction rate that was slightly higher amongst middle- and high-income earners.
The top reasons for agreeing with the cooling measures were as follows:
- I think the cooling measures will slow down the increase in property prices (57%)
- I think the cooling measures will lower property prices (38%)
- The cooling measures will help me better afford the property I intend to buy (28%)
Related article: Buying A Condo in Singapore: How Much Do You Need to Earn?
From these responses, it is clear that a significant proportion of Singaporean buyers are concerned about steadily rising property prices and worry about being priced out of the market.
However, the proportion of Singaporeans who disagreed with the cooling measures (48%) was almost as large. Their top reasons for opposing the cooling measures were as follows:
- The cooling measures will make it harder for me to afford the propert(ies) I intend to buy (68%)
- I think the cooling measures will make it harder for me to sell my property (36%)
- I think the cooling measures will slow down the increase in property prices and value (32%)
This group is likely to be composed of property owners who are worried that the cooling measures will affect the investment potential of their property, or those who are looking to sell their properties in the near future and do not want the price to be affected.
Who Is Affected by the Property Cooling Measures?
68% of the Singaporeans surveyed reported that they would be affected by the property cooling measures.
The majority (60%) reported they would be affected by the increased ABSD, with those in the 50 to 59 age group making up the largest proportion of this group of respondents. A significant fraction of these respondents is likely to be property investors looking to buy a second or subsequent property.
Related article: Guide to Your First Investment Property: Singapore or Overseas?
In spite of the cooling measures, however, 60% still said they intended to buy a property in the future, indicating a high degree of confidence in the property market.
However, almost 1 in 4 (24%) said they were looking to delay their property purchase, while 50% said they were now considering a less expensive property, with an average budget decrease of 9.7%.
It is thus clear that the property cooling measures, especially the ABSD hike, are already having their intended effect by making it more difficult for investors to purchase property. This is likely to be most pronounced in the case of Singaporean and PR property investors buying a second and subsequent property.
As investors become more circumspect about making property purchases, price growth is likely to slow. However, the extent to which this will happen is unclear, as there still appears to be strong demand from buyers who wish to purchase homes to live in. This group will not be affected by the ABSD hike if they are first-time homebuyers or dispose of their existing homes.
Shift in Buyers’ Property Preferences: Space Prioritised over Location
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The pandemic has caused a shift in housing preferences and boosted demand for larger homes as well as properties in the Outside Central Region (OCR). In addition, with more time spent at home, 1 in 3 Singaporeans now want to repurpose and beautify their homes. A significant proportion of this group of buyers will be purchasing a home to live in rather than as an investment, and might thus not be affected by the ABSD hike.
Related article: Singapore Work From Home Culture Is Changing How We Shop for Homes in 2021
For instance, those who are first-time homebuyers will not be affected by the ABSD hike, including millennials who still live with their parents, 76% of whom intend to move out in the next year. Some might, however, be affected by the tighter TDSR limits and the lower LTV limits, in the case of those buying HDB property financed by an HDB loan.
Related article: Bank Loan Vs HDB Loan 5 Key Differences: The Complete Guide to Financing Your HDB
When it comes to existing homeowners who wish to upgrade to a bigger home, more might now decide to sell their existing property rather than keep and rent it out. If this happens, the supply of properties on the market will be given a boost, lowering market prices further.
The full impact of the property cooling measures in 2022 remains to be seen. To find out more, stay tuned in the coming months for PropertyGuru’s quarterly Singapore Property Market Report, where we gauge the effects of the cooling measures and other factors on market prices.
In the meantime, you can read the Singapore Property Market Report Q1 2022.
More FAQs on the Latest Property Cooling Measures
When Did the Latest Singapore Property Cooling Measures Kick In?
The most recent property cooling measures took effect on 16 December 2021.
What Are the Latest Singapore Property Cooling Measures?
The measures include an increase in the Additional Buyer’s Stamp Duty (ABSD), lower Loan-to-Value (LTV) limits and a tighter Total Debt Servicing Ratio (TDSR) threshold.
What Property Cooling Measures Affect HDB Flat Buyers?
HDB flat purchasers do not have to pay ABSD. However, they will face a tighter LTV limit when taking out an HDB loan and a tighter TDSR threshold.
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This article was written by Joanne Poh. A former real estate lawyer, she writes about property and personal finance and spends her free time compulsively learning languages and roller skating in carparks.
