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News Release

Singapore

Jones Lang LaSalle’s Perspective: Measures to Maintain a Stable and Sustainable Property Market

Pre-emptive measures to cool the market; a tad later than expected


The latest round of anti-speculative measures that Ministry of National Development has released through two statutory boards concurrently – Urban Redevelopment Authority (URA) and Housing Development Board (HDB) are to weed off potential speculation rather than affecting first time buyers and genuine home occupiers.  The measures and probable impacts are summarized in the table below:

Statutory Board
Measures
Impact
HDB
Allow households with income of between $8,000 to $10,000 to buy new DBSS flats with a $30,000 CPF Housing Grant Improves affordability for sandwiched class, should fuel short to medium term demand for DBSS flats
HDB
Increase supply of new flats, DBSS and ECs
Ensure land price stability in the mid to long term but no immediate effect on prices
HDB
Shorten completion of BTO flats
No likely impact on prices nor reduce flat applications until shorter delivery timeline is physically felt
HDB
Increase Minimum Occupation Period (MOP) for non-subsidised flats to 5 years
Immediate to short term reduction of demand for public and private housing market particularly those multiple ownership i.e. owns a non-subsidised HDB flat and a private property.
Limited information on this market size.
HDB
Disallow concurrent ownership of both HDB flats and private residential properties within the MOP
URA
Increase holding period for imposition of Seller’s Stamp Duty (SSD) from 1 to 3 years
Increase costs for short term speculators but limited impact on genuine long term investors 
URA 
URA
For buyers with 1 or more outstanding housing loans:
• Increase minimum cash payment from 5% to 10% of valuation limit
• Decrease Loan-to-Value (LTV) from 80% to 70%   

Effectively reduces the affordability for buyers with outstanding home loans 

No impact on first time home buyers and buyers with high liquidity

Some of these pre-emptive measures are not unfamiliar. In our recent research paper where we described this recent period as the “soft policy era” where measures introduced have enough flexibility built in to accommodate subsequent adjustments; which is exactly what the government has now done with the SSD. The recent twitch of increasing the holding period from one to three years is similar to that when the policy was first introduced in May 1996. 

However in our opinion, these pre-emptive measures are introduced a tad later than we had expected. While market sentiments have been rather soft of late which is likely due to the Hungry Ghost Festival coupled with Euro-zone and double-dip fears, the level of short term speculation (as measured by the percentage of subsales in the private market) is also comparatively low. Subsales transactions have lost some 600 basis points from the high of 16% recorded a year ago in 2Q09, to close at 10% of total transactions in 2Q10.
 
While in absolute terms the level of transactions has surged by 3.5% (compared to 2Q09), the subsales volume has instead dropped from 1,303 in 2Q09 to 825 in 2Q10 (based on caveats obtained from URA REALIS assessed on Tues Aug 24, 2010).  And while prices in the private market, as measured by the URA Property Price Index (PPI), has also surged a total of 38.2% since 2Q09, the rate of increase has been easing gradually to 5.3% in 2Q10 after an initial spike of 15.8% in 3Q09.

Dr Chua Yang Liang, Head of Research for Singapore and South East Asia commented “We believe the latest introduction of measures are motivated largely by the unabated rise in public housing prices where HDB Resale Price Index recorded a stunning high of 4.1% in 2Q10, after a continual rise averaging some 3.0% per quarter since 2Q09, stripping the affordability of public housing.

“Overall we welcome this policy adjustment, as the impact is more targeted at reducing speculative buying and not affecting occupier demand. This would promote a healthier investment climate for the Singapore residential market in the longer term. Additionally, private property prices (URA PPI) are unlikely to be adversely impacted but could moderate to a more sustainable level of 2-3% per quarter going forward. Similarly public housing price growth (HDB Resale Price Index) could moderate to 1-2% per quarter,” Dr Chua added.