Speaker 1: Hello and welcome. Where will Singapore property prices go after
Speaker 1: the government imposed higher stamp duties to cool the property market.
Speaker 1: I'm Jonathan Piris from the money Mind team and we're
Speaker 1: looking at the five things you need to know about
Speaker 1: the recent hikes in additional buyer, stamp duty or A
Speaker 1: BS D. Joining me today are Christine, so senior Vice
Speaker 1: president of Research and Analytics at Orange Tea and Thai
Speaker 1: and Ismail Gao CEO of Prop Realty. Thanks for joining
Speaker 1: us today guys. Now, among the changes, the biggest jump
Speaker 1: was the A BS D for foreigners which doubled from 30%
Speaker 1: to 60%. Now, to put that in perspective, a foreigner
Speaker 1: buying a 10 million Singapore dollar property will now need
Speaker 1: to pay an additional $3 million in additional buyer stamp
Speaker 1: duty or a BS D
Speaker 1: for Singaporeans who are buying their second home. The rate
Speaker 1: went up from 17% to 20% which means if they
Speaker 1: were purchasing the same $10 million property, they will need
Speaker 1: to pay an additional $300,000 more in A BS D. Now,
Speaker 1: what do you guys think the government is hoping to
Speaker 1: achieve with these measures.
Speaker 2: Christine, the cooling measures was more to curb investment demand
Speaker 2: both from locals as well as foreigners or foreigners is
Speaker 2: mainly because
Speaker 2: of these people are coming in perhaps to set up
Speaker 2: a family office. We do see some of these headline
Speaker 2: deals where some of them were paying quite high prices
Speaker 2: for some of the ultra luxury homes in the market.
Speaker 2: So we are expecting more mainland Chinese to come in
Speaker 2: as well since they have opened their international borders. And
Speaker 2: ever since they have made the announcement, end of last year,
Speaker 2: we are already receiving a lot of inquiries from these people.
Speaker 2: So if they were to pick up many of these
Speaker 2: luxury homes, it may potentially
Speaker 2: bring up prices especially in the core central region. And
Speaker 2: of course, when prices continue to rise in the luxury segment,
Speaker 2: it may bring up the overall price for the whole
Speaker 2: property market as well.
Speaker 1: And of course, Ismail the $10 million question is, do
Speaker 1: you think it will work? That's really the big question
Speaker 1: just increasing the foreigner stamp duty by doubling it from 30%
Speaker 1: to 60%. Will it work? Honestly? I'm not so sure
Speaker 1: because looking at the data for last year, a good 90%
Speaker 1: of the buyers were actually Singaporeans and pr in any market.
Speaker 1: If 90% are creating the demand to push the price
Speaker 1: further up, how can a 10% make a huge difference?
Speaker 1: And this is something that I'm quite puzzled, why do
Speaker 1: we need to hit the foreigners so hard? I accept
Speaker 1: that we have
Speaker 1: protect the Singaporeans and Pr and I for that, really
Speaker 1: welcome the introduction of not increasing the Singaporean and the
Speaker 1: pr for the first purchase. That's really the right thing
Speaker 1: to do. But the thing here is this, when we
Speaker 1: look at the data again, the foreigners to be exact
Speaker 1: was less than 5% the whole of last year. And
Speaker 1: including those people who are buying the 2nd and 3rd
Speaker 1: property for investment purposes, who are subjected to the
Speaker 1: higher additional stamp duties also come to about 10%. So
Speaker 1: that's why we are not. So sure will this have
Speaker 1: really an effective tool to put the price in check
Speaker 1: if the demand is still strong and Singapore property market
Speaker 1: has always shown to be resilient. But if they didn't
Speaker 1: do this, what could they have done? I think one
Speaker 1: of the key things that we could have really look
Speaker 1: at it here is from the perspective of welcoming foreigners
Speaker 1: but not at the expense,
Speaker 1: Singaporeans and pr wanting to purchase the first home. Therefore,
Speaker 1: rather than making it a 60% straight for the foreigners
Speaker 1: purchasing the property, it could have been tiered, for example,
Speaker 1: I'm OK with the 60% for foreigners, but maybe for
Speaker 1: the price tag of the property for the 1st $10
Speaker 1: million because I don't think the Singaporean or the pr
Speaker 1: who are purchasing the first property are looking at the
Speaker 1: above the $10 million mark.
Speaker 1: But foreigners buying above $10 million mark, we could have
Speaker 1: calibrated it into probably again, higher than the past 30%
Speaker 1: maybe to 40%. Therefore, we still give a clear signal
Speaker 1: to foreigners. You have to pay additional stamp duties at
Speaker 1: the same time as far as you want to buy
Speaker 1: any properties in Singapore below the $10 million mark, you
Speaker 1: will have to pay a hefty price of 60% because
Speaker 1: we want to treat
Speaker 1: Singaporean and Pr F, Christine, how do you expect these
Speaker 1: changes to impact property prices?
Speaker 2: The cooling measures will have impact on different groups of buyers.
Speaker 2: First time buyers will not be affected because they don't
Speaker 2: pay A BS D for their first properties. But we
Speaker 2: are looking at investment demand, they already own more than
Speaker 2: one property. Then most likely these people will be affected
Speaker 2: because the A BS D has been increased across the board.
Speaker 2: So uh with this change, we do expect
Speaker 2: perhaps some of these investors, they may pull back on
Speaker 2: their demand uh temporary, not because they cannot afford, but
Speaker 2: some people may just want to observe the market a
Speaker 2: while more. Some others may also be hoping for prices
Speaker 2: to fall after cooling measures. We do expect some pullback
Speaker 2: in demand from some of these foreign buyers and investors
Speaker 2: because these are the group of people where the A
Speaker 2: BS D increase the most. So as demand contracts, you know,
Speaker 2: for some of these buyers
Speaker 2: where most of these people, they will be buying perhaps
Speaker 2: uh homes in the luxury segment or city fringe areas.
Speaker 2: And these properties usually command higher prices. So when demand contracts,
Speaker 2: it also means that the overall price index may fall
Speaker 2: a little. So because of that, we have adjusted our
Speaker 2: price projections slightly lower from 5 to 8% for this
Speaker 2: year to 4 to 7
Speaker 1: percent. Ismail. Do you agree after the cooling measures, I
Speaker 1: have revised my forecast.
Speaker 1: In fact, at the start of the year, we expected
Speaker 1: the new launches to sell in the tune of 8
Speaker 1: to 9000 units because we are expecting almost 12,000 units
Speaker 1: to be launched this year.
Speaker 1: But because of the current cooling measures and the sentiments broadly,
Speaker 1: I've reduced the likely sales number to be anything between
Speaker 1: 6005 to 7005. And that easily a drop about 20%
Speaker 1: from the initial forecast. That's as far as the volume
Speaker 1: is concerned for the new launches in terms of price point. Initially,
Speaker 1: we expected the prices to go up by anything between
Speaker 1: 7 to 8.
Speaker 1: But I think now I want to be a bit
Speaker 1: more modest, probably 4 to 5%. But the mere fact
Speaker 1: that the first quarter, we already have a 3.3%. I
Speaker 1: think the next few quarters, we are going to see
Speaker 1: a very lukewarm, maybe a very low below one or
Speaker 1: towards the 1% increase likely to hit 4 to 5%
Speaker 1: for the rest of the year. So prices will moderate
Speaker 1: slightly this year. But will there be an
Speaker 1: impact on demand resulting from these measures especially in the
Speaker 1: current economic environment? That's
Speaker 2: a good question. You are right. Although FT has indicated
Speaker 2: that they may ha their rate hikes for a while,
Speaker 2: but interest rate still remain quite high. So therefore some
Speaker 2: of these buyers, they may feel that mortgage payments may
Speaker 2: still be quite substantial, especially if they are buying a
Speaker 2: property in the resale market. There will be a few
Speaker 2: things that the buyers will have to content
Speaker 2: with like inflation. The high interest rates uncertainties in the market,
Speaker 2: there is still limited stock in the market. Supply is
Speaker 2: still not coming in fast enough to meet demand for
Speaker 2: some of these segments, especially like for example, the suburban
Speaker 2: area where most of the H DB upgrader would want
Speaker 2: to buy a property. And we do know that many
Speaker 2: of these flat owners, they have sold their flats for
Speaker 2: quite high prices. They do have quite a considerable sum
Speaker 2: of money
Speaker 2: to perhaps, you know, upgrade to a condominium. Some
Speaker 1: of the key challenges right now we are facing here
Speaker 1: is this developers' margins are thin. And the main reason
Speaker 1: here is that the land costs are not cheap. When
Speaker 1: you look at most of the G L s, it
Speaker 1: has been well above the $1000 mark or some slightly lower.
Speaker 1: But by and large, they are more than $1000 per
Speaker 1: square foot per plot ratio
Speaker 1: and taking into consideration of the construction costs and inflation. Today,
Speaker 1: most of the new launches are going at $2000 and
Speaker 1: above per square foot and yet the developers' margins are
Speaker 1: relatively thin. So how much can the
Speaker 1: developers reduce prices if your profit margin is barely 10%
Speaker 1: are slightly above? Therefore, I don't think this is going
Speaker 1: to have a huge reduction in price points for any
Speaker 1: of the buyers who are looking forward to think that
Speaker 1: there might be a correction but certainly developers are going
Speaker 1: to be sensitive to the pricing. But when I say sensitive,
Speaker 1: I think it is more likely to be for the
Speaker 1: core central region
Speaker 1: but not for the mass market to put things in
Speaker 1: perspective the whole of last year in the mass market
Speaker 1: O C R outside the central region, the foreigners purchase
Speaker 1: was only 1.5% which means 98.5% for Singaporeans. And pr therefore,
Speaker 1: the
Speaker 1: demand is truly real from the aspirations of Singaporeans and
Speaker 1: pr who are prepared to pay the money. So how
Speaker 1: much can the price be corrected if this group of
Speaker 1: people and their aspiration is to own a private property
Speaker 1: in the mass market continue to come and pick up
Speaker 1: the units
Speaker 1: just to recap the cooling measures. Are mainly targeting foreigners.
Speaker 1: But as they are such a small proportion of buyers,
Speaker 1: it remains to be seen how much of an impact
Speaker 1: this will have on the property market. Our market watchers
Speaker 1: say prices may moderate slightly but will unlikely drop too
Speaker 1: much as developers cope with high land prices and resilient demand.
Speaker 1: There are other factors at play as well as investors
Speaker 1: are facing a tough economic environment and high interest rates.
Speaker 1: So the first condominium launch since the A BS D
Speaker 1: hikes were announced was blossoms by the park in one north.
Speaker 1: It sold about 75% of its 207 units at its
Speaker 1: weekend launch and 96% of buyers were Singapore citizens and
Speaker 1: Pr s now, will we see this kind of take
Speaker 1: up for the remaining projects being completed this year? Despite
Speaker 1: the measures,
Speaker 2: there are still many buyers in the market like for example,
Speaker 2: first timers who are not affected by the cooling measures
Speaker 2: and they will proceed to buy. This could be a
Speaker 2: buying opportunity because many of the foreign buyers who have
Speaker 2: exceeded the market. Some of them may feel that prices
Speaker 2: may stabilize for a while because of the cooling measures.
Speaker 2: The supply that we are looking at is that about
Speaker 2: a third will come from the outside central region which
Speaker 2: are the suburban area.
Speaker 2: 20 over percent is from the luxury homes and another
Speaker 2: 30 over percent in the city fringe areas. So uh typically,
Speaker 2: I think many of these first timers because they are
Speaker 2: not affected by the cooling measures. Usually they will buy
Speaker 2: homes in the city fringe areas and the suburban area.
Speaker 2: So this year with more of this supply coming in
Speaker 2: from these two market segments, we do see that perhaps
Speaker 2: there will still be some price increase for some
Speaker 2: these areas are because of the demand that is still
Speaker 2: quite substantial or quite resilient. Whereas for the luxury market,
Speaker 2: some of these high end buyers, um I think if
Speaker 2: they are affected by the cooling measures, some of them
Speaker 2: may take up citizenship or they may convert to pr
Speaker 2: and then they could continue to buy properties as Apr
Speaker 2: or new citizen because the A BS D rate is
Speaker 2: lower for the ultra rich. They may still continue to
Speaker 2: pay the A BS D. Some of them may just
Speaker 2: hold back for a while uh while others may divert
Speaker 2: their wealth to other asset classes or to other countries.
Speaker 1: I think it will dampen the demand at least for
Speaker 1: the next couple of months. It is very usual knee
Speaker 1: jerk reactions from many people to monitor
Speaker 1: and look at the outcome. But the concern has been
Speaker 1: the prices despite many round of cooling measures have been
Speaker 1: on the up trend positive. And if you look at
Speaker 1: it for the first three months of 2023, the price
Speaker 1: index indicates a 3.3% increase. So the concern. Really here
Speaker 1: is this, if this goes unchecked,
Speaker 1: will the Singaporeans and the pr especially those who want
Speaker 1: a roof as a first timer, will they be out
Speaker 1: place looking at it from a bigger scheme of everything?
Speaker 1: As long as the property price keeps going up, there
Speaker 1: is an effect and that's the main concern.
Speaker 1: I think the other key point here is this, can
Speaker 1: we have a sustainable growth looking at the property price
Speaker 1: index particularly for the private sector in year 2021, it
Speaker 1: was about a 10.6% increase and last year was 8.6%.
Speaker 1: And for the first three months is 3.3%. Are we
Speaker 1: expecting another double digit
Speaker 1: then? Is this sustainable? Imagine just property prices going up
Speaker 1: by over 30% in the last three years? But the
Speaker 1: pace and the increment of the salaries of the younger
Speaker 1: generations cannot keep pace with it. So that's the truth
Speaker 1: of the matter. So it is in a way pre emptive.
Speaker 1: I think the government is looking at the
Speaker 1: data where it is moving and they want to curb
Speaker 1: it at the nip right now. Finally, do you think
Speaker 1: that the new cooling measures may end up pushing up
Speaker 1: demand for the Singapore rental market which hit an all
Speaker 1: time high in the first quarter of this year. We
Speaker 1: are not really so sure how many of the foreign
Speaker 1: buyers are prepared to pay the 60%. Some may but
Speaker 1: we are really not so sure.
Speaker 1: But it also means that foreigners who still look at
Speaker 1: Singapore as a safe haven, setting up their businesses or
Speaker 1: their child going to school may opt for rental for
Speaker 1: the time being instead of paying a 60% A BS D.
Speaker 1: How about they stay for another 23 years in rental
Speaker 1: and apply for APR eventually because once they get their
Speaker 1: pr status from a 60% additional stamp duty, it drops
Speaker 1: to five,
Speaker 1: 5%. Therefore, it does make sense. Once someone who is
Speaker 1: truly interested in Singapore as a place, they want to
Speaker 1: have their roof. I don't think it is going to
Speaker 1: totally deter them to come into Singapore rental might be
Speaker 1: a possible option, which means I think some of the
Speaker 1: bigger properties and the luxury properties, the rent will stay
Speaker 1: firm and may even be in greater demand
Speaker 2: is that more tenants are shifting downstream. We have observed
Speaker 2: more aspects and even locals, some of them, they are
Speaker 2: shifting from the luxury market to city fringe and from
Speaker 2: city fringe to suburban area. And for some of the aspects,
Speaker 2: they are even going to the H DB market. H DB.
Speaker 2: Rents have been rising across the island and in some
Speaker 2: locations as well. And we do notice some of these
Speaker 2: record rents that has been achieved. For example, there was
Speaker 2: a unit
Speaker 2: that was rented for $6500 per month. And I think
Speaker 2: this is the highest rent. There has also been some
Speaker 2: units that were rented for more than $5000 and for $6000.
Speaker 2: And for the lower tier of those units rented out for,
Speaker 2: let's say less than $3000 or $2500. The proportion has
Speaker 2: been decreasing over the past few months. So this means
Speaker 2: that affordable rents in the H DB market has been decreasing.
Speaker 1: So to sum up, we've been unpacking what the latest
Speaker 1: round of stamp duty increases means for the Singapore property market,
Speaker 1: our experts are expecting a small drop in boat sales
Speaker 1: volume and prices. However, rents could go up as potential
Speaker 1: buyers hit by higher A BS D turn to the
Speaker 1: rental market instead.
Speaker 1: But in the long run, the market will also be
Speaker 1: shaped by other factors. One of these being high land prices,
Speaker 1: the market is also supported by the demand for property
Speaker 1: investing among Singaporeans and permanent residents and they account for
Speaker 1: the vast majority of buyers
Speaker 1: looking further ahead with prices still buoyant despite multiple rounds
Speaker 1: of cooling measures. There's also the question of whether further
Speaker 1: duty rises are sustainable
Speaker 1: and that's the five things you need to know about
Speaker 1: Singapore's latest property tax hikes. A big thank you to
Speaker 1: my guest Christine Sun, Senior Vice President of Research and
Speaker 1: Analytics at Orange T and Thai and Ismael Gao, CEO
Speaker 1: of prop realty. Catch money. Mind on C N A
Speaker 1: and online at me, watch C N A dot Asia
Speaker 1: and youtube.