How Will the New Measures Impact the Singapore Property Market? - Copyright 2010 Propwise.sg. All rights reserved.

How Will the New
Measures Impact
  the Singapore
Property Market?

       Copyright 2010 Propwise.sg.
                All rights reserved.

Introduction

On August 30 2010 the government announced additional measures to cool the
property market and “encourage greater financial prudence among property
purchasers.” How will these measures affect the market? This report
summarizes the key measures and also examines their likely impact.

About Propwise.sg

We are a blog dedicated to helping you understand the Singapore real estate
market and make better buying, selling, renting and investing decisions – minus
all the hype and misinformation.

                                        Copyright 2010 Propwise.sg.
                                                 All rights reserved.

What new measures were introduced in this round?

1) The government will aim to control population growth to less than +100,000
per year (growth will slow to ~1.7% per year, down from the five year average of
3.7%).

2) For residential property purchasers with at least one loan outstanding, the
maximum Loan To Valuation (LTV) for subsequent loans will be cut from 80% to
70%, and minimum cash payout raised from 5% to 10%.

3) The holding period for Seller’s Stamp Duty (first introduced in February 2010)
will be extended from 1 year to 3 years for buyers who bought on or after 30
August 2010 (full SSD can be calculated using 3% of transaction value ‐ $5400).
After each year, this falls by 1/3.

4) HDB will offer up to 22,000 Build To Order (BTO) flats next year, up from the
16,000 already announced for this year. HDB will also expedite the completion
of BTO flats from mid‐2011 onwards, which will then require 2.5 years waiting
time (versus 3 years currently).

5) Private homeowners who buy a resale HDB flat must now dispose their
existing private property within six months of purchase. The Minimum
Occupation Period (MOP) of resale flats will be increased from 3 to 5 years.

6) Buyers of resale HDBs will also be prohibited from buying a private property
or subletting their flat for 5 years.

7) The “sandwich class” (couples earning S$8,000‐10,000 per month that are not
entitled to buy subsidized HDB flats) are now allowed to buy Design Build and
Sell Scheme (DBSS) flats in addition to Executive Condominiums (ECs). The
supply of land for DBSS and EC flats will also be increased, with up to 7,000 DBSS
and 8,000 EC flats potentially available in 2010‐2011.

                                            Copyright 2010 Propwise.sg.
                                                     All rights reserved.

What is the expected impact of these measures?

1) The government’s aim is to ensure a stable and sustainable property market
where prices move in line with economic fundamentals. The property market
has been buoyant – prices rose 11% in the first half of 2010, and price levels
have exceeded the historical peak reached in the second quarter of 1996. These
new measures aim to reduce the speculative and investment demand in the
housing market.

2) Despite tighter control of population growth and foreign worker inflow,
Singapore’s overall population is still expected to hit 6 million by 2020. For 2010,
due to the booming economy (government GDP estimate of 15% this year),
around 80,000 new foreign workers will be needed. The growing population will
continue to support end user demand in the long term.

3) Compared with the measures announced in February 2010 (lowering of LTV
to 80% from 90%, imposition of SSD for property sale within one year of
purchase), the new measures are more onerous and clearly target the HDB and
mass market segments.

4) More than 80% of Singapore households reside in HDB flats. By targeting the
HDB segment, this should moderate price momentum and transaction volume
for the whole market.

5) In particular, new private launches aimed at HDB upgrader demand and mass
market properties will likely be most affected via lower volumes and downward
pricing pressure.

6) The supply of HDB flats will also be increased to meet end user demand. The
government wants to keep public housing affordable. The shortened waiting
time period for BTO flats could shift demand away from the resale market.

                                              Copyright 2010 Propwise.sg.
                                                       All rights reserved.

What is the expected impact of these measures (continued)?

7) Furthermore, as private homeowners are now discouraged from buying resale
flats as they will have to sell their private residential property within 6 months and
hold their HDB unit for 5 years. This will dampen demand in the resale HDB market,
and should lead to declining Cash Over Valuations (COVs), a moderation in price
increases, and lower volumes.

8) As the “sandwich class” has more options, the demand for DBSS flats should
increase at the expense of demand for ECs.

Conclusion: Expect lower volumes and a moderation of prices going forward,
though it’s not clear if prices will fall due to the low interest rates and solid end
user demand.

   Was this report useful to you? Anything else you want us to write
   about? Let us know at http://www.propwise.sg/contactus.html

        Head to http://www.propwise.sg for more property tips!

                                            Copyright 2010 Propwise.sg.
                                                     All rights reserved.