Singapore’s housing market is strengthening. The private residential property index rose strongly by 10.57% during 2021, sharply up from the prior year’s 2.21% increase and its best showing since 2010, according to flash estimate released by the Urban Redevelopment Authority (URA). When adjusted for inflation, house prices rose by 6.89% y-o-y last year.

During the latest quarter (i.e. q-o-q in Q4 2021), residential property prices increased 5.02% (3.71% inflation-adjusted).

Source: Urban Redevelopment Authority

• In Core Central Region (CCR), prices of non-landed private residential properties rose by a modest 3.67% (0.22% inflation-adjusted) during 2021, following y-o-y declines of 0.4% in 2020 and 1.7% in 2019, according to URA. Quarter-on-quarter, prices increased 2.52% (1.23% inflation-adjusted) during the latest quarter.
• In the Rest of Central Region (RCR), property prices were up by a huge 16.94% (13.04% inflation-adjusted) during 2021, sharply up from annual rises of 4.69% in 2020 and 2.8% in 2019. Quarter-on-quarter, prices rose by 7.31% (5.97% inflation-adjusted) in Q4 2021.
• In Outside Central Region (OCR), property prices rose by 8.44% (4.83% inflation-adjusted) during 2021, following y-o-y increases of 3.2% in 2020 and 4.2% in 2019. During the latest quarter, prices increased 5.4% (4.08% inflation-adjusted).

Weak residential construction had a bid impact - in Q3 2021, there were 2,149 uncompleted private residential units launched in Singapore, down by 43.3% from 3,791 units in Q3 2020, according to URA. This follows a 4.5% fall in the total number of uncompleted private residential units launched during 2020.  In fact as of Q3 2021, there were only about 17,100 unsold units in Singapore, down by 35% from a year ago and close to the historical low seen in 2017.

In a surprise move to cool the housing market, the government introduced another round of market-cooling measures in December 2021, including raising the additional buyer’s stamp duty (ABSD), tightening the total debt servicing ratio (TDSR), and reducing the loan-to-value (LTV) ratio.

Yet market sentiment remains positive. “All said, the private residential market is performing in line with economic fundamentals and even if we see a 7% price increase in 2022, this should not be read as a sign of over-heating,” said Savills.

Singapore’s economy grew strongly by 7.2% during 2021, in sharp contrast from the previous year’s pandemic-induced contraction of 5.4% and the highest growth since 2010, according to the Ministry of Trade and Industry (MTI). The country’s fast economic recovery can be partly attributed by the government’s fast rollout of coronavirus vaccines. By end-2021, about 87% of the population were fully-vaccinated.

For 2022, Singapore’s economy is expected to return to its long-term average growth of about 5%.

Foreigners have been able to buy any apartment without prior government approval since the Residential Property Act of July 19, 2005. However, foreigners still cannot purchase vacant land and landed properties without permission from the Singapore Land Authority. Non-residential property is not subject to these ownership restrictions.

Prices of newly-launched developments

Prices in newly launched residential developments in 2021 (based on Savills Q1, Q2, and Q3 2021 reports):

In Core Central Region (CCR):

• In Midtown Modern, at Tan Quee Street, prices of residential units ranged from SG$ 2,299 (US$1,696) to SG$ 4,213 (US$3,108) per sq. ft.
• In The Atelier, on Makeway Avenue, residential units are priced from SG$ 2,743 (US$2,024) to SG$ 3,040 (US$2,243) per sq. ft.
• In Irwell Hill Residences, on Irwell Hill, prices of residential units ranged from SG$ 2,707 (US$1,997) to SG$ 2,867 (US$2,115) per sq. ft.
• In One Bernam, at Bernan Street, prices of residential properties start at SG$ 2,573 (US$1,898) per sq. ft.
• In Klimt Cairnhill, situated on Cairnhill Road, residential units sell for SG$ 3,818 (US$2,817) per sq. ft.
• In Jervois Mansion, on Jervois Road, residential units are priced at US$ 2,372 (US$1,750) per sq. ft.

In the Rest of Central Region (RCR):

• In Normanton Park, located at Normanton Park, residential units are priced from SG$ 1,469 (US$1,084) to SG$ 1,856 (US$1,369) per sq. ft.
• In The Reef at King’s Dock, located in Harbourfront Avenue, prices of residential units ranged from SG$ 2,002 (US$1,477) to SG$ 2,831 (US$2,089) per sq. ft.
• In One-North Eden, situated in Slim Barracks Rise, prices ranged from SG$ 1,907 (US$1,407) to SG$ 2,014 (US$1,486) per sq. ft.
• In Bartley Vue, on Jalan Bunga Rampai, residential units are sold for SG$ 1,741 (US$1,284) to SG$ 2,021 (US$1,491) per sq. ft.

In the Outside Central Region (OCR):

• In Pasir Ris 8, located at Pasir Ris Drive 8, prices of residential units ranged from SG$ 1,411 (US$1,041) to SG$ 2,084 (US$1,537) per sq. ft.
• In The Watergardens at Canberra, on Canberra Drive, residential units are sold for SG$ 1,232 (US$909) to SG$ 1,579 (US$1,165) per sq. ft.

New round of property curbs

In a surprise move to cool the housing market, for Singaporean citizens, in December 2021 the ABSD rate was raised from 12% to 17% for those buying their second residential property, and from 15% to 25% for those buying their third and subsequent properties.

For permanent residents (PRs), the additional buyer’s stamp duty (ABSD) for second residential property purchases will rise from 15% to 25% and from 15% to 30% for third and subsequent property purchases.

Foreigners buying any residential property will now pay an ABSD flat rate of 30%, up from 20%.

 In addition, the total debt servicing ratio (TDSR) threshold for borrowers was also tightened from 60% to 55%. Also, the LTV limit for HDB-granted loans was reduced from 90% to 85%. The LTV limit for loans obtained from financial institutions to purchase HDB flats remains unchanged at 75%.

“The private residential measures are calibrated to dampen broad-based demand, especially from those purchasing property for investment rather than owner-occupation,” said the Finance Ministry, National Development Ministry and Monetary Authority of Singapore in a joint statement.

“Measures to tighten financing conditions for both public and private housing will encourage greater financial prudence.”

Singapore government firmly restrains property prices

The moderation of house prices over the past years is the result of deliberate government policy.

Before and after the global economic crisis, Singapore’s property market surged. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% inflation-adjusted).

The Singapore government sensibly took steps, and when these turned out to be not enough, took further measures.

In October 2012 it limited the mortgage term to 35 years, and lowered loan-to-value (LTV) ratios to 60% for loans longer than 30 years (or loans stretching beyond age 65).

This was only the first of 10 rounds of property-market cooling measures.

Seller’s stamp duty (SSD) was then introduced on owner-occupied housing sold within a year of purchase. A little later, the stamp duty was revised upwards, with sales of owner-occupied houses taxed sold within a year of acquisition taxed at 16% of sale price. Then the holding period was increased from one year to four years. In subsequent rounds, LTV ratios were lowered and minimum cash down payment increased.

Despite these measures, property prices kept surging. In the sixth round, new residential loans were capped at 35 years, with existing loans over 35 years facing tighter LTV ratios. In the seventh round the government revised the additional buyer’s stamp duty (ABSD), increasing rates from 5% to 7% for Permanent Residents’ (PRs) first residential property purchase, and Singaporeans’ second residential purchase.

This resulted in a 23.5% decline in sales transactions within a year, but prices continued to surge till the end of 2013.

Eighth, ninth and tenth rounds of market-cooling measures followed.

These market-cooling measures have been effective, as evidenced by the 10% decline in property prices from 2014 to 2017.

After partially relaxing its market-cooling measures in March 2017, the Singaporean government reversed gear after 2017 sales reached 25,010 units, up 52.7% y-o-y - the biggest increase since 2009, according to URA.

From July 6, 2018, the ABSD rates were raised by 5% for all homebuyers and by 10% for entities, except for Singaporean citizens (SCs) and permanent residents (PRs) purchasing their first residential property. An additional ABSD of 5% was also introduced for developers buying residential properties for housing development.

The government also tightened loan-to-value (LTV) limits on residential property loans from 80% to 75%.

Also, the government had raised the stamp duty on home purchases with value exceeding SG$ 1 million (US$ 737,517) from 3% to 4% in February 2018.

These property curbs have successfully restrained the market in recent years.

Residential property sales surging

Residential property transactions soared 83.3% y-o-y to 25,632 units in the first three quarters of 2021, following a growth of 9.2% in 2020 and annual declines of 13.5% in 2019 and 11.5% in 2018, according to URA.

In Q1-Q3 2021:

• Uncompleted private residential property sales rose by 36.5% y-o-y to 9,901 units.
• Completed private residential property sales fell by 12.9% y-o-y to just 108 units.
• Sub-sales skyrocketed by 238% y-o-y to 409 units.
• Re-sales rose strongly by 134.8% y-o-y to 15,214 units.

By region:

• In Core Central Region, property sales doubled to 4,926 units in the first three quarters of 2021 from a year earlier.
• In the Rest of Central Region, sales rose by 65.6% y-o-y to 8,213 units.
• In Outside Central Region, sales increased strongly by 90.3% y-o-y to 12,493 units over the same period.

Residential construction declining sharply

In Q3 2021, there were 2,149 uncompleted private residential units launched in Singapore, down by 43.3% from 3,791 units in Q3 2020, according to URA. This follows a 4.5% fall in the total number of uncompleted private residential units launched during 2020.

Yet there are wide regional variations:

• In CCR, launches increased 2.6 times to 410 units in Q3 2021 from a year earlier
• In RCR, launches fell by 82.1% to 420 units in Q3 2021 from a year earlier
• In OCR, launches rose slightly by 2.7% y-o-y to 1,319 units in Q3 2021

Total supply in the pipeline increased slightly by 1.3% q-o-q to 47,715 units in Q3 2021. Of which, 17,140 units are still available in the market, compared to 19,384 units in the previous quarter.

• Private residential units under construction rose by 2.5% q-o-q to 43,049 units in Q3 2021.
• Planned development fell by 8.8% to 4,666 units in Q3 2021 from the previous quarter.

In Q3 2021, there were a total of 380,187 housing units available in Singapore, up by 0.2% from the previous quarter and by 1.3% a year earlier, according to URA. Of which 355,988 units are occupied, while the remaining 24,199 units are available, making up a 6.4% vacancy rate – slightly up from 6.3% in the previous quarter and 6.2% a year earlier.

Very low interest rates; modest mortgage loan growth

Variable interest rate mortgages dominate Singapore’s housing market. Tweaking the rate on mortgages, plus government restrictions on land use and ownership, has helped pre-empt a housing boom despite sharply lower interest rates over 8-9 years.

From July to November 2021, the average housing loan rate was 2.81%, down from 2.84% in June 2020-March 2021 and 3.27% in June 2019-May 2020, according to the Monetary Authority of Singapore (MAS).

Outstanding housing loans rose by a modest 3.4% in Q2 2021 from the same period last year, to SG$206.29 billion (US$152.19 billion), based on figures from the MAS.

About three-fourths of the outstanding housing loans are for owner-occupied properties while the remaining are for investment properties.

In Singapore, variable interest rate mortgages are pegged to Singapore inter-bank offered rate (SIBOR). A typical SIBOR-pegged adjustable rate mortgage looks like this:

The mortgage interest rate therefore comprises two parts a) spread or margin b) index, typically the Singapore interbank offered rate (SIBOR).

Rents rising again

Rents are rising again, as demand for residential rental properties continues to increase, amidst the gradual easing of pandemic-related restrictions.

“With the easing of restriction measures and reopening of borders, we note a rise in the inflow of foreigners competing with Singaporeans for rental properties,” said Savills.

In Q3 2021, the rental index of private all-residential properties rose by 7.23% from a year earlier (4.55% inflation-adjusted), following a y-o-y fall of 0.57% in 2020 and annual rises of 1.36% in 2019 and 0.59% in 2018, according to the URA. Quarter-on-quarter, the overall rental index increased 1.83% (1.08% inflation-adjusted) in Q3 2021.

During the year to Q3 2021, the average rent for landed properties rose by 7.6% while it increased 6.9% for non-landed properties.

In the luxury market, the Savills basket of high-end non-landed private residential rents rose for the third consecutive quarter by 1.4% q-o-q to SG$4.20 (US$3.10) per sq. ft. per month in Q3 2021 – a larger growth than the 0.9% in Q2.

Rent movements in Q3 2021:

• rents rose by 5.5% y-o-y in Core Central Region, in contrast to an annual fall of 2.3% in Q3 2020
• rents rose by 7.5% y-o-y in the Rest of Central Region, in contrast to a y-o-y decline of 1.7% a year ago
• rents rose by 9.5% y-o-y in Outside Central Region, sharply up from an increase of 1.1% in Q3 2020

In Q3 2021, the leasing volume of private residential units reached 27,101 transactions – up 13.3% from the previous quarter and by 0.5% a year earlier.

“While projects close to the Central Business District (CBD) continue to enjoy high demand, developments in the suburban areas with good connectivity and a wide range of amenities were also favoured by tenants,” Savills added.

Yields for high-end units are very low

High-end Singapore Centre condominiums yields remain poor, at around 3%, according to Global Property Guide research. Yields are a little higher on smaller apartments than large ones, as is typical in most property markets. Those yields alone would not be a reason for owning property in Singapore.

99-year leasehold properties have the highest rental yields in Singapore because of their lower prices relative to other types of properties.

Singapore has a small private rental sector, mostly serving expatriates. In the local sector 81% of all rental units are owned by the HBD. Since 2014 many expatriates have relocated from Core Central Region to suburban and fringe areas in Outside Central Region, according to Joseph Tan, CBRE’s executive director (residential).

Foreign demand is crucial

More than 38% (2 million) of Singapore’s population are foreigners, the sixth-highest percentage of foreigners in the world. Of these 9% (o.53 million) are permanent residents, and the remaining 29% (1.7 million) expats, according to the Department of Statistics Singapore.

Tighter immigration rules are being imposed by the government, due to strong popular disquiet. Beginning 1 September 2015 work pass holders need to meet a minimum fixed monthly salary of SG$5,000 (US$ 3,689) to sponsor the stay of their spouse/ children here (on Dependant’s Pass) and a minimum fixed monthly salary of SG$10,000 (US$7,377) to sponsor the stay of their parents here (on Long Term Visit Pass).

Aside from the tighter immigration rules, and the imposition of market-cooling measures, the COVID-19 pandemic has adversely impacted demand from foreign homebuyers in the past two years.

In 2020, the total number of private houses purchased by foreigners in the country dropped to a 17-year low of just 742 units, according to real estate consultancy firms ERA Realty Network and Orange Tee & Tie. This accounted for only 4.1% of total sales – the lowest in more than two decades. But with the reopening of borders and the gradual easing of pandemic-related restrictions, there is now a renewed interest from foreign investors and the share of foreign homebuyers to total sales in Singapore increased slightly to 4.5% in 2021.

“[The reopening of borders via the vaccinated travel lanes (VTLs)] have facilitated more foreign buyers and overseas investors to have easier access to Singapore’s property market,” said PropNex Realty chief executive Ismail Gafoor.

Jervois Mansion, a freehold condominium project in District 10, CCR and Parc Greenwich EC, launched in September 2021 located OCR, are among the most preferred residential projects among PRs and foreign homebuyers in Q4 2021. Other top selling projects include Normanton Park, Dairy Farm Residences, The Jovell, Parc Clematis, The Florence Residences, OLA (EC), Treasure At Tampines, The Avenir, and Avenue South Residence.

Mainland Chinese buyers, Malaysians, Qataris, Indonesians, Americans and Indians make up the largest groups of non-Singaporean homebuyers in the country.

Singapore citizens and Singapore Permanent Residents pay a lower additional buyer’s stamp duty on residential property acquisitions than foreigners, depending on the number of properties owned. For Singapore citizens, the additional buyer seller duty was recently raised from 12 to 17% for their second residential properties, and from 15% to 25% for their third and subsequent properties. For Singapore Permanent Residents, the rate of additional buyer seller duty is also raised from 15% to 25% for their second properties, and from 15% to 30% for their third and subsequent properties.

For foreigners, the ABSD is raised to a flat rate of 30%, from the previous 20%.

US citizens are however treated the same as Singapore citizens under the US-Singapore Free Trade Agreement, that is, no additional buyer’s stamp duty is payable on the first Singapore residential property purchase.

Strong economic growth; improving labour market

Singapore’s economy expanded by 7.2% during 2021, in sharp contrast from the prior year’s pandemic-induced contraction of 5.4% and the highest growth since 2010, according to the Ministry of Trade and Industry (MTI). The economy grew by an average of 5.3% annually from 2010 to 2018 and slowed sharply to 1.3% in 2019.

During 2021:

• Manufacturing expanded by 12.8%, up from 7.3% in the previous year
• Construction surged 18.7%, a sharp rebound from the 35.9% contraction in 2020
• Services expanded by 5.2%, in contrast to a 6.9% decline in the previous year

Singapore’s fast economic recovery can be partly attributed by the government’s fast rollout of coronavirus vaccines. By end-2021, about 87% of the population were fully-vaccinated.

For 2022, Singapore’s economy is expected to return to its long-term average growth of about 5%.

The labour market is recovering steadily. Unemployment fell to 2.5% in November 2021, the lowest since the start of the pandemic, according to the Ministry of Manpower (MOM). Resident unemployment fell to 3.2% while citizen unemployment dipped to 3.5%.

“The increase in group sizes for dining out and the opening of more vaccinated travel lanes have allowed sectors hardest-hit by Covid-19 such as food and beverage services and air transport to begin ramping up capacity again. We expect hiring demand in domestic sectors to pick up with gradual relaxation of community measures,” said Manpower Minister Tan See Leng.

“With the spread of the Omicron variant throughout the world, it is likely that Singapore will see a new wave of cases in the coming weeks. Businesses and workers need to be adaptable and flexible as the Covid-19 situation changes,” Tan See Leng added.

The government introduced the SGUnited Jobs and Skills Package in May 2020 to help workers affected by the pandemic. The program received an additional SG$ 5.4 billion (US$ 4 billion) funds in Budget 2021 to support the hiring of 200,000 locals and provide up to 35,000 training opportunities. As of Q3 2021, more than 146,000 workers have been placed into jobs or training under the program.

Annual inflation accelerated to 3.8% in November 2021, the highest level since February 2013, mainly driven by increases in the cost of food and housing accommodation, according to Statistics Singapore.

Despite the increasing inflationary pressures, the Monetary Authority of Singapore (MAS), the country’s central bank, retained the rate of appreciation of the S$NEER policy band at 0% per year in October 2021 with no change to the width of the policy band, to continuously boost economic activity.

“This policy stance was appropriate as core inflation was projected to rise only gradually from subdued levels and keep below its historical average.”

The average exchange rate in December 2021 was US$ 1 = SG$ 1.3633, a 2.3% depreciation from a year ago.

Sources:

• Comparison of Property Price Index for 3rd Quarter 2021 and 4th Quarter 2021 (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2022/Jan/pr22-01a.pdf
• Release of 3rd Quarter 2021 real estate statistics (Urban Redevelopment Authority): https://www.ura.gov.sg/Corporate/Media-Room/Media-Releases/pr21-44
• Number of New Sale, Sub-Sale and Resale Transactions for Private Residential Units by Market Segment (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2021/Oct/pr21-44d.pdf
• Singapore Residential Sales Briefing Q3 2021 (Savills): https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/singapore-residential-sales-briefing-q3-2021.pdf
• Singapore Consumer Price Index, Nov 2021 (Statistics Singapore): https://www.singstat.gov.sg/whats-new/latest-news/cpi-highlights
• Data on Housing and Bridging Loans (Monetary Authority of Singapore): https://www.mas.gov.sg/statistics/monthly-statistical-bulletin/data-on-housing-and-bridging-loans
• You wouldn´t own a Singapore condominium for rental yields! (Global Property Guide): https://www.globalpropertyguide.com/Asia/Singapore/Rental-Yields
• Comparison of Rental Index for 2nd Quarter 2021 and 3rd Quarter 2021 (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2021/Oct/pr21-44a3.pdf
• Singapore Residential Leasing Q3 2021 (Savills): https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/singapore-residential-leasing-briefing-q3-2021.pdf
• Additional Buyer’s Stamp Duty (ABSD) Guide for Property Buyers (2021) (Property Guru): https://www.propertyguru.com.sg/property-guides/additional-buyers-stamp-duty-guide-13034
• Singapore property curbs may be short-term fix for market (Business World): https://www.bworldonline.com/singapore-property-curbs-may-be-short-term-fix-for-market/
• Singapore’s additional stamp duty hike for foreigners ‘earth shattering’ for luxury market but unlikely to dampen demand from ultra rich (South China Morning Post): https://www.scmp.com/week-asia/economics/article/3159966/singapores-additional-stamp-duty-hike-foreigners-earth
• ‘Harder hitting’ cooling measures will slow home sales, en bloc market: Analysts (CNA): https://www.channelnewsasia.com/singapore/property-cooling-measures-2021-impact-home-sales-en-bloc-2383881
• Singapore new private home sales rebound with 9% rise in October (The Straits Times): https://www.straitstimes.com/business/property/singapore-new-private-home-sales-rebound-with-9-rise-in-october
• Singapore raises additional buyer´s stamp duty, tightens HDB loan limit to cool property market (The Straits Times): https://www.straitstimes.com/singapore/housing/singapore-raises-additional-buyers-stamp-duty-tightens-hdb-loan-limit-to-cool
• MAS Monetary Policy Statement - October 2021 (Monetary Authority of Singapore): https://www.mas.gov.sg/news/monetary-policy-statements/2021/mas-monetary-policy-statement-14oct21
• Unemployment rates in Singapore continue to decline in Nov 2021: MOM (The Straits Times): https://www.straitstimes.com/singapore/jobs/singapores-resident-unemployment-rate-declines-to-32-in-november
• Singapore economy beats expectations to grow 5.9% in Q4 and 7.2% in 2021 (The Straits Times): https://www.straitstimes.com/business/economy/singapore-economy-grows-59-in-q4-and-72-in-2021-better-than-expected