Photo: rigel
Photo: rigel
September 9, 2023

The persistent concern of residents in Singapore has centered around the availability and affordability of housing. The escalation of prices in both private properties and the HDB resale market, resulting in considerable buyer apprehension and triggering the enforcement of several cooling measures, has been offset by recent data reflecting a tendency toward price moderation in both these sectors.

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Property Insights
Wendy Ker

The issue of housing availability and affordability has consistently remained a top concern for residents in Singapore. After witnessing soaring prices in both private properties and the HDB resale market, which raised significant concerns among buyers and prompted the implementation of multiple cooling measures, recent data indicates a trend of moderation in prices for both segments.

Nevertheless, the impact of the recently introduced cooling measures, such as higher ABSD for foreigners and the requirement for foreign buyers to obtain approval before purchasing land in commercial and residential zones, could potentially influence the aforementioned trends. 

Private housing supply

In a press release in June, it was confirmed that the supply of private housing on the Confirmed List would be increased by an additional 5,160 units to meet the robust demand in the private housing market. 

The total supply of private housing on the Confirmed List for 2023 has been raised to 9,250 units, marking the highest level since 2013. This figure represents an increase of nearly 50% compared to the supply in 2022 and approximately 2.5 times the supply observed in 2021.

The increased supply on the Confirmed List for the second half of 2023 will contribute to the existing pipeline supply, addressing the housing needs of the population. This addition will bring the total pipeline supply of private housing (including ECs) to approximately 63,500 units, consisting of 50,200 units with planning approval and 13,300 units from GLS sites and awarded en-bloc sites that are awaiting planning approval.

Among these units, around 40,400 are projected to be completed between 2023 and 2025, which represents more than double the 20,000 units completed from 2020 to 2022. Overall, the total supply of both public and private housing units to be completed between 2023 and 2025 is estimated to be around 100,000, significantly contributing to meeting housing needs in the coming years.

How is the private property market performing?

In the second quarter of 2023, the overall private housing prices experienced a slight decline for the first time since the first quarter of 2020. This was primarily driven by reduced prices for non-landed properties and a notable moderation in the rate of price increase for landed properties compared to the previous quarter.

Private residential property rentals on the other hand witnessed a notably slower growth rate of 2.8% quarter-on-quarter. This is in contrast to the 7.2% increase observed in the preceding quarter, marking the smallest quarter-on-quarter gain since the fourth quarter of 2021.


How is the HDB resale market performing?

In a press release on July 3, HDB reported that the second quarter of 2023 registered the lowest resale volume in the past three years, dating back to Q3 2020, with a total of 6,409 HDB units being resold.

HDB's flash estimate for the Resale Price Index (RPI) in the second quarter of 2023 stands at 176.0, showing a 1.4% increase compared to the first quarter of 2023. Although this growth is higher than the 1.0% increase observed in the first quarter of 2023, it remains lower than the average quarterly growth of 2.5% observed in 2022.

What impact has the previous cooling measure had on the property market?

Following the implementation of the doubled ABSD for foreign buyers in late April, there has been a noticeable decline in condominium sales during the second quarter of 2023, indicating apparent deterrence among foreign buyers.

In the second quarter, foreign buyers purchased a total of 205 private non-landed homes, representing a 22.6 percent decrease from the 265 units bought in the previous quarter. Over the same period, the proportion of foreign purchases declined from 6.9% to 4.2%.

From 2017 until the first quarter of 2023, mainland Chinese buyers constituted the largest group of foreign buyers in Singapore. However, with the introduction of the significant ABSD hike, which impacted mainland Chinese buyers but not American buyers (who are subject to the same stamp duty as Singaporeans), American buyers swiftly surpassed them to become the largest group of foreign buyers in the second quarter of 2023.

Even with the ABSD increase, the demand from locals remained robust, evident from the proportion of condo units bought by Singaporeans, which surged from 72.3% to 79.9% in the first quarter.

Overall, the implementation of multiple rounds of cooling measures has finally led to signs of moderation in the once buoyant property market.

What is the latest cooling measure and who does it affect?

New restrictions have been implemented for foreign buyers in the residential and commercial land markets. On July 19, an announcement was made stating that developments on land zoned for "commercial and residential use" will now be classified as residential property and subject to regulation under the Residential Property Act (RPA).

Foreign individuals and entities (those who are not Singaporean citizens, companies, limited liability partnerships, or societies) will now be required to obtain approval if they intend to purchase any land that is currently zoned as 'commercial and residential'.

In the past, foreign individuals and entities would only need approval if their intention was to acquire land zoned as "residential" or "residential with commercial on the first level." 

Existing owners of land zoned or property permitted for such use do not need to seek approval if their intention is to retain the property as it is. However, if they wish to retain and redevelop the property, they will be required to seek approval.

Foreign individuals intending to purchase or acquire interest can be exempt from seeking approval if they were granted the Option To Purchase (OTP) by the sellers before July 20; the OTP is exercised on or before August 9; and the OTP has not been altered on or after July 20.

The restriction on residential and commercial land may potentially lead foreign buyers to explore other types of assets.

In general, the increased supply of housing by the government is undoubtedly addressing the housing supply issue. The implementation of cooling measures over the years has resulted in a more moderate property market and a notable decline in foreign buyers, creating opportunities for interested Singaporean buyers.

Although the latest cooling measure does not directly affect Singaporeans, those interested in shophouses may potentially encounter higher overall prices and rents if foreign buyers shift their focus from pure residential properties to shophouses instead.

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