After a 4-year slump, things were starting to look increasingly optimistic for the Singapore property market during the first half of 2018. However, the government decided to curb the buoyancy with a new set of property cooling measures on the 6th of July.
Earlier on, home prices in Singapore were expected to surge by as much as 10% this year. But analysts now believe that prices could now remain subdued and flat into next year. Some even gave estimates that prices may even decline by as much as 3%.
It was noted that one of the main reasons for the government to intervene was due to the sharp increase in property prices in the first 6 months of 2018 – by approximately 7%. In addition, the move was also fuelled by property developers’ aggressive stance in their bids for land and the high transaction prices in the collective sale segment.
On top of the curbs which were announced in July, the government has also implemented guidelines and restrictions that limit the total number of “shoebox” apartments developers are allowed to build within a residential project.
Earlier on this month, the government has also cut down the number of land supply for sale under the 1H 2019 Government Land Sales (GLS) programme, citing the huge amount of supply in the pipeline and a subdued demand.
Analysts feel that these moves will not only increase the cost for property developers but also reduce Singapore’s appeal to foreign investors.
However, the government felt that if the sharp increase in home prices in Singapore was left unchecked, it could run well ahead of the economic fundamentals of the nation and as a result, it will raise the risk of having to correct it in future – which will likely destabilize the situation.
According to real estate group CBRE, a total of 37 collective sale transactions (worth $10.8 billion) were concluded in 2018 alone and expects the value to fall by as much as 90% in 2019.
It was also noted that property developers will take a cautious approach next year and may pace out the launch of their projects in order to remain sustainable in the next few years.