Singapore’s housing market is cooling rapidly
Lalaine C. Delmendo | March 29, 2020
After a shortlived recovery, Singapore’s housing market is slowing, amidst plunging demand. The private residential property index rose by 2.67% during 2019, a sharp slowdown from a strong growth of 7.86% in 2018, according to the Urban Redevelopment Authority (URA). When adjusted for inflation, house prices rose by 1.86% y-o-y last year.
During the latest quarter (i.e. q-o-q in Q4 2019), residential property prices increased by a meager 0.52% (0.22% inflation-adjusted).
The Outside Central Region is still rising fastest:
- In Core Central Region (CCR), prices of non-landed private residential properties fell by 1.7% (-2.5% inflation-adjusted) during 2019, in contrast to a 6.7% expansion in 2018, according to URA. Quarter-on-quarter, prices dropped 2.8% (-3.1% inflation-adjusted) during the latest quarter.
- In the Rest of Central Region (RCR), property prices were up by 2.8% (2% inflation-adjusted) during 2019, a slowdown from a y-o-y increase of 7.4% in the prior year. Quarter-on-quarter, prices actually fell 1.3% (-1.6% inflation-adjusted) in Q4 2019.
- In Outside Central Region (OCR), property prices rose by 4.2% (3.4% inflation-adjusted) during 2019, a sharp slowdown from the previous year’s 9.4% rise. During the latest quarter, prices increased 2.8% (2.5% inflation-adjusted).
Demand is falling sharply. Home sales, which include new sales, sub-sales and resales, fell by 13.5% y-o-y to 19,150 units in 2019, following a decline of 11.5% a year earlier, according to the URA.
Yet residential construction is rising strongly. In 2019, there were 11,345 uncompleted private residential units launched in Singapore, sharply up by 29.4% in the previous year, and the highest level since 2013.
Overall, 2o2o will be a challenging year for Singapore’s housing market, amidst macroeconomic headwinds and market uncertainties, which are exacerbated by the impact of the novel coronavirus outbreak.
Singapore’s economic growth slowed to a minuscule 0.7% growth in 2019 from a year earlier, sharply down from an annual expansion of 3.1% in 2018 and the weakest performance since 2009. This was mainly attributed to a decline in manufacturing and exports sector, amidst the ongoing US-China trade war.
In February 2020, Singapore’s Prime Minister Lee Hsien Loong said that the economy is on the verge of a recession, mainly due to the expected blow from the COVID19pandemic. The government recently cut its GDP forecast to a 0.5% contraction, down growth of about 0.5% to 2.5%.
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 some newly launched residential developments in Singapore (based on a Savills Q4 2019 report):
In Core Central Region (CCR):
- In Midtown Bay,on Beach Road, prices of residential units ranged from SGD 2,438 (USD 1,708) to SGD 3,804 (USD 2,665) per sq. ft. in Q4 2019
- In Neu At Novena, located in Moulmein Rise, residential units are priced at about SGD 2,431 (USD 1,703) to SGD 2,907 (USD 2,037) per sq. ft.
- In One Holland Village Residences, situated in Holland Village Way, residential properties sold for SGD 2,323 (USD 1,627) to SGD 3,363 (USD 2,356) per sq. ft. in Q4 2019
- In Pullman Residences, Newton, located in Dunearn Road, prices range from SGD 2,725 (USD 1,909) to SGD 3,353 (USD 2,349) per sq. ft.
- In RoyalGreen, located in Anamalai Avenue, residential units are priced from SGD 2,612 (USD 1,830) to SGD 2,883 (USD 2,020) per sq. ft. in Q4 2019
- At The Iveria, located in Kim Yam Road, prices range from SGD 2,525 (USD 1,769) to SGD 2,751 (USD 1,927) per sq. ft.
In the Rest of Central Region (RCR):
- In La Mariposa, located in Mangis Road, residential properties are priced at about SGD 1,878 (USD 1,316) per sq. ft. in Q4 2019
In the Outside Central Region (OCR):
- In Dairy Farm Residences, located in Dairy Farm Lane, prices of residential units range from SGD 1,361 (USD 954) to SGD 1,649 (USD 1,155) per sq. ft. in Q4 2019
- In Midwood, situated in Hillview Rise, residential units are priced from SGD 1,551 (USD 1,087) to SGD 1,748 (USD 1,225) per sq. ft.
- In Sengkang Grand Residences, located in Compassvale Bow, prices range from SGD 1,599 (USD 1,120) to SGD 1,898 (USD 1,330) per sq. ft.
- In Urban Treasures, located in Jalan Eunos, prices range from SGD 1,878 (USD 1,316) to SGD 2,035 (USD 1,426) per sq. ft.
Property curbs will stay
Last month, Deputy Prime Minister Heng Swee Keat said that the government has no plans of easing its property cooling measures, despite the ailing economy and the COVID19 outbreak.
“It is not on our radar at this point because we need to make sure that we stabilize the economy and we address long term structural issues,” Deputy PM Heng Swee Keat said.
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 Additional Buyer’s Stamp Duty (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%.
ADDITIONAL BUYER’S STAMP DUTY (ABSD)
|Rates on or before July 5, 2018||Rates on or after July 6, 2018|
|SCs buying 1st residential property||0%||0%|
|SCs buying 2nd residential property||7%||12%|
|SCs buying 3rd & subsequent residential property||10%||15%|
|PRs buying 1st residential property||5%||5%|
|PRs buying 2nd & subsequent residential property||10%||15%|
|Foreigners buying any residential property||15%||20%|
|Entities buying any residential property||15%||25% plus additional 5% for developers|
|Source: Channel News Asia|
Earlier, the government had raised the stamp duty on home purchases with value exceeding SGD1 million (USD 699,147) from 3% to 4% in February 2018.
These property curbs have now successfully restrained the market.
“In an economy that is growing in nominal terms at 3% to 5%, it is not sustainable to have property prices increasing at double digits,” said Ravi Menon, managing director of MAS.
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.
Residential property sales continue to fall
Residential property transactions, including new sales, sub-sales and resales, fell by 13.5% y-o-y to 19,150 unitsin 2019, following a decline of 11.5% in 2018, according to URA.
- Uncompleted private residential property sales rose by 17.7% y-o-y to 9,734 units.
- Completed private residential property sales plummeted by 66.1% y-o-y to just 178 units.
- Sub-sales fell by 13.7% y-o-y to 289 units.
- Re-sales fell by 31.2% y-o-y to 8,949 units.
- In Core Central Region, property sales fell by 4.3% y-o-y to 3,010 units in 2019.
- In the Rest of Central Region, sales dropped 15.2% in 2019 from a year earlier, to 6,777 units.
- In Outside Central Region, sales fell by 14.9% y-o-y to 9,363 units over the same period.
Residential construction is rising strongly
In 2019, there were 11,345 uncompleted private residential units launched in Singapore, sharply up from 8,769 units in 2018, 6,020 units in 2017, but still far below the 15,885 units launched in 2013, and 21,478 units in 2012, according to URA.
- In CCR, launches increased more than threefold to 1,518 units in 2019from a year earlier
- In RCR, launches were up by 12.5% to 4,693 units in 2019 from a year earlier
- In OCR, launches surged 24.5% y-o-y to 5,134 units in 2019
However total supply in the pipeline fell by 4.5% to 49,173 units in Q4 2019 from the same period last year.
- Private residential units under construction rose strongly by 40.5% y-o-y to 38,958 units in Q4 2019.
- Planned development plummeted by 57% to 10,215 units in Q4 2019 from a year earlier.
MAJOR PRIVATE RESIDENTIAL PROJECTS COMPLETED, Q4 2019
|Project||Location||Developer||No. of Units|
|GEM Residences||Lorong 5 Toa Payoh, OCR||GEM Homes Pte Ltd||578|
|Parc Riviera||West Coast Vale, OCR||EL Development (West Coast) Pte Ltd||752|
|Park Place Residences at PLQ||Paya Lebar Road, RCR||Roma Central Pte Ltd/Milano Central Pte Ltd/ Verona Central Pte Ltd||429|
|Stars of Kovan||Upper Serangoon Road, RCR||Kovan Treasure Pte Ltd||395|
|Sources: Savills, URA|
In Q4 2019, there were a total of 373,561 housing units available in Singapore, up by 0.4% from the previous quarter, according to URA. Of which 353,082 units are occupied, while the remaining 20,479 units are available, making up a 5.5% vacancy rate (sharply down from 6.1% in Q3 2019, 6.4% in Q2, and 6.3% in Q1).
Interest rates remain very low, yet mortgage loans are falling
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 June 2019 to January 2020 the average housing loan rate was 3.27%, according to the Monetary Authority of Singapore (MAS), the country’s central bank, a slight increase from 3.22% in December 2018 to May 2019.
Outstanding housing loans were down by 1.7% in January 202o from the same period last year, to SG$200.83 billion (US$141.44 billion), based on figures from the MAS.
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:
|Period||Interest Rate (p.a.)|
|First Year||0.75% + 1-Month SIBOR|
|Second Year||0.75% + 1-Month SIBOR|
|Third Year||1.00% + 1-Month SIBOR|
|Fourth Year Onwards||1.25% + 1-Month SIBOR|
The mortgage interest rate therefore comprises two parts a) spread or margin b) index, typically the Singapore interbank offered rate (SIBOR).
Yields for high-end units are very low; rents are finally rising
On the demand side, expatriate arrivals are down, due to tighter immigration policies. And the weaker homes-for-sale market affects the rental market, with unsold inventory competing with existing rental stock.
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.
Rents are now rising gradually. In 2019, the rental index of private all-residential properties rose by 1.4% from a year earlier (0.6% inflation-adjusted), an improvement from a minuscule growth of 0.6% in 2018, and y-o-y declines of 1.9% in 2017, 4% in 2016, and 4.6% in 2015, according to the URA. However, during the latest quarter, the overall rental index dropped 1% q-o-q (-1.3% inflation-adjusted).
During 2019, the average rent for landed properties fell by 3.4% while it increased 1.9% for non-landed properties.
In the luxury market, the Savills basket of high-end non-landed private residential rents rose by 3% y-o-y in 2019, to an average of SGD 4.17 (USD 2.91) per sq. ft. per month.
Rent movements during 2019:
- rents rose slightly by 1.4% y-o-y in Core Central Region
- rents rose by 2% y-o-y in the Rest of Central Region
- rents rose by 2.7% y-o-y in Outside Central Region
The vacancy rate for island-wide private residential properties fell to 5.5% in Q4 2019 – the lowest level in almost seven years, according to Savills.
However, the rental market may slow this year because of the COVID19 outbreak. “The continued spread of the coronavirus has forced many companies to postpone their relocation plans. Therefore, the leasing market is expected to see a significant drop in transaction volume over a short timeframe,” said Savills.
“Nevertheless, we expect rents to remain relatively stable during the same period on the back of limited new completions in 2020 and the low vacancy rate in existing stock.”
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).
99-year leasehold properties have the highest rental yields in Singapore because of their lower prices relative to other types of properties.
Foreign demand is crucial
More than 38% (2.2 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$5,000 (US$ 3,500) to sponsor the stay of their spouse/ children here (on Dependant’s Pass) and a minimum fixed monthly salary of SG$10,000 (US$7,000) to sponsor the stay of their parents here (on Long Term Visit Pass).
Aside from the tighter immigration rules, the market-cooling measures have eased demand from foreign homebuyers. In the 18 months after the imposition of the curbs (July 2018 to December 2019), the total number of private housing units purchased by foreigners in the country dropped 32% as compared to the 18 months prior to the cooling measures.
The Kingsford Hillview Peak, near the Hillview MRT station, and the Cairnhill Nine, located in the Orchard Road district are among the most preferred residential projects among PRs and foreign homebuyers. Other top selling projects amongst PRs and foreigners in Q4 2019 include Parc Esta, Parc Clematis, Jadescape, Maria One Residences, Martin Modern and The Crest.
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 and Singapore Permanent Residents, the maximum rate of additional buyer seller duty is 15%. For foreigners it is a flat rate of 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.
Sharp economic slowdown, rising unemployment
Singapore’s economic growth slowed to a minuscule 0.7% in 2019.
Unemployment stood at 2.3% in 2019, up from 2.1% the previous year and the highest level since 2009, according to the Ministry of Manpower (MOM). Unemployment among Singaporeans was 3.3% in 2019, up from 3% a year earlier. Similarly, the jobless rate among PRs rose to 3.1% last year, from 2.9% in 2018.
Headline inflation was 0.8% in January 2020, up from 0.4% a year earlier, according to the Department of Statistics Singapore. However core inflation actually declined to 0.3% in January 2020 – the lowest level in more than four years. Inflationary pressures are expected to remain subdued in the near term, with MAS’s core inflation and CPI-All Items forecast remain at 0.5% to 1.5%.
In October 2019, the country’s central bank, the Monetary Authority of Singapore (MAS), eased its monetary policy for the first time in three years, as the domestic economy only narrowly dodged recession amidst the US-China trade war. MAS decided to lower slightly the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band to ensure medium-term price stability, given the current economic outlook.
The average exchange rate in February 2020 was USD1 = SGD1.39, a slight depreciation from USD1 = SGD1.3537 a year ago.
- Singapore Residential Sales Briefing Q4 2019 (Savills): http://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/singapore-residential-sales-briefing-q4-2019.pdf
- Singapore Residential Leasing Briefing Q4 2019 (Savills): http://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/singapore-residential-leasing-briefing-2019q4.pdf
- Release of 4th Quarter 2019 real estate statistics (Urban Redevelopment Authority): https://www.ura.gov.sg/Corporate/Media-Room/Media-Releases/pr20-06
- Table I.5A Banks: Loans and Advances of DBUs to Non-Bank Customers by Industry (Monetary Authority of Singapore): https://secure.mas.gov.sg/msb-xml/Report.aspx?tableSetID=I&tableID=I.5A
- Interest Rates of Banks and Finance Companies (Monetary Authority of Singapore): https://secure.mas.gov.sg/msb/InterestRatesOfBanksAndFinanceCompanies.aspx
- World Economic Outlook Database (International Monetary Fund): https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
- Singapore Property Market Cooling Measures (SRX): https://www.srx.com.sg/cooling-measures
- New property cooling measures announced: Higher ABSD rates, tighter loan limits (ChannelNewsAsia): https://www.channelnewsasia.com/news/singapore/singapore-property-cooling-measures-higher-absd-rates-loan-limit-10502710
- You wouldn´t own a Singapore condominium for rental yields! (Global Property Guide): https://www.globalpropertyguide.com/Asia/Singapore/Rental-Yields
- Market Outlook 2020 – Private Residential and HDB (Orange Tee Consultancy): https://www.orangetee.com/home/ResearchPath/Market%20Outlook%202020.pdf
- HDB Market Pulse – Real Estate Data Trend Q4 2019 (Orange Tee Consultancy): http://www.orangetee.com/Home/ResearchPath/OrangeTee%20-%20HDB%20Market%20Pulse%20Q4%202019.pdf
- Population and Population Structure (Department of Statistics Singapore): https://www.singstat.gov.sg/find-data/search-by-theme/population/population-and-population-structure/latest-data
- Chart of the Day: Chinese buyers dominate foreigner home sales in 2019 (Singapore Business Review): https://sbr.com.sg/residential-property/news/chart-day-chinese-buyers-dominate-foreigner-home-sales-in-2019
- Citizens from new markets among buyers of top condos here (The Business Times): https://www.businesstimes.com.sg/real-estate/citizens-from-new-markets-among-buyers-of-top-condos-here
- Summary Table: Unemployment (Ministry of Manpower): https://stats.mom.gov.sg/Pages/Unemployment-Summary-Table.aspx
- Prices and Price Indices (Department of Statistics Singapore): https://www.singstat.gov.sg/find-data/search-by-theme/economy/prices-and-price-indices/latest-data
- Singapore eases monetary policy for first time in 3 years (Today): https://www.todayonline.com/singapore/singapore-eases-monetary-policy-first-time-3-years
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