Strata office and shophouse owners could be biggest gainers following additional curbs for the home market


July 06, 2018

Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

SINGAPORE, 6 July 2018 – The government has acted to cool the residential property market.  Additional Buyer's Stamp Duty (ABSD) rates have been raised for some categories of residential property purchases, and the Loan-to-Value (LTV) limits on residential property purchases have been lowered, all with effect from 6 July 2018.

Sales volume expected to be subdued although home prices could still inch towards 10% for full-year 2018

The measures should achieve their intended objectives of cooling demand and moderating price growth, as almost all categories of buyers have been affected. This explains the rush to snap their dream homes the night before the measures kick in.

We expect sales to stall as soon as the measures become effective as buyers step back to evaluate the financial implications and developers reassess pricing strategies.  The home market may only start to see some signs of activity in September after the lunar seventh month.  Even then, we expect sales volume to stay subdued unless developers adopt competitive marketing strategies.

The collective sales market will also be dampened as developers become wary of end-demand and are hurt by the 5% non-remittable ABSD on land purchase.  This will have an impact on their offer prices.

The rush to purchase units the night before the measures kick-in could still contribute to the URA all-residential private property price index (PPI) inching up in 3Q18 although at a moderated pace from 2Q18 given that sales will likely slow thereafter. For the year as a whole, the growth in the PPI could still inch towards 10% given the more than 7% growth in 1H18.

All said, we feel the additional measures have been introduced too hastily coming just after 9.1% growth in PPI over four quarters. The market should have been given a chance to find its own level in response to the expected surge in launches in coming months.

Strata-office and shophouse markets could emerge the biggest gainers

The biggest gainers following this set of measures will likely be owners of strata-offices and shophouses approved for commercial use. 

The government's swift response to curb home price growth has tampered the prospects of residential properties as attractive investments. Investors looking for alternatives to park their money could divert their attention to the strata office and shophouse markets as they are not subjected to this round of purchase or sales restrictions/encumbrances.

The residential leasing market might also stand to benefit as some foreign owners of collective sale sites who might now look to rent instead of own their place of residence to avoid the higher ABSDs. Some local owners of collective sale sites could also look to rent as an interim measure while they wait in hope of private home prices to correct.

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