To bring down prices in today’s market, the Singapore government has imposed three sets of property cooling measures in the last year and a half.
But while the quarterly number of HDB resale transactions has fallen since its peak in 2021, prices are still rising, although slower than before.
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In 1Q23, the HDB resale price index increased by 1% from the preceding quarter. This is slower compared to the 2.3% growth in 4Q22. However, this was the 12th consecutive quarter that resale prices have increased.
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The three cooling measures were implemented in December 2021, September 2022, and April 2023.
“We think the HDB resale market is finding its footing and likely stabilising after the introduction of new cooling measures in September 2022,” said Wong Siew Ying, head of research and content at PropNex.
Although the first two cooling measures suppressed market activity, they failed to dampen prices in the public resale housing market, said Professor Qian Wenlan from the Institute of Real Estate and Urban Studies at the National University of Singapore.
“In the wake of the pandemic, residents need more space to work from home. Young couples living with their parents also like to move out and have their own space,” she stated.
“Due to Singapore’s reputation as a safe haven, both local and foreign investors are interested in investing in residential properties in Singapore. Rising prices in the private housing market will also push up the prices of resale HDB flats to some extent.”
According to the government, the property cooling measures had a “moderating effect” on the market.
Upon analysing sales volume and prices in the two quarters before and after the cooling measures were introduced, Prof. Qian saw that HDB quarterly resale transactions decreased by 6.3% after the cooling measures in 2021. However, prices increased by 2.6% in the same period.
After the cooling measures were implemented in September 2022, the average quarterly resale volume of HDB flats decreased by 3.6%. However, prices increased by 1.6%.
Other factors affecting the resale market include the rise of loan interest rates and the increasing supply of units. Construction delays due to COVID-19 also made people turn from BTO flats to resale flats, therefore increasing the demand.
With the ABSD being raised last month, Singaporeans buying their second property now have to pay a 20% fee. For those buying their third and subsequent properties, the rate went up to 30% from 25%. Meanwhile, PRs must pay 30% ABSD for their second property, and 35% for their third and subsequent properties.
These changes have raised the transaction cost for those thinking of getting private properties, therefore making them less attractive compared to public housing. This may cause buyers to hold back on upgrading plans. Others may even sell their units before buying a new one, and rent in the meantime.
If people stay put in their flats, there will be a lower number of flats up for sale. However, people seeing their flats will lead to a great supply in the market. This will also increase the demand for rentals.
“The net effect will then depend on which is the bigger affected group,” said Christine Sun of OrangeTee & Tie.
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