WEBVTT - 5 things about Singapore’s ABSD hikes

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<v Speaker 1>Hello and welcome. Where will Singapore property prices go after

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<v Speaker 1>the government imposed higher stamp duties to cool the property market.

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<v Speaker 1>I'm Jonathan Piris from the money Mind team and we're

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<v Speaker 1>looking at the five things you need to know about

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<v Speaker 1>the recent hikes in additional buyer, stamp duty or A

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<v Speaker 1>BS D. Joining me today are Christine, so senior Vice

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<v Speaker 1>president of Research and Analytics at Orange Tea and Thai

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<v Speaker 1>and Ismail Gao CEO of Prop Realty. Thanks for joining

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<v Speaker 1>us today guys. Now, among the changes, the biggest jump

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<v Speaker 1>was the A BS D for foreigners which doubled from 30%

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<v Speaker 1>to 60%. Now, to put that in perspective, a foreigner

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<v Speaker 1>buying a 10 million Singapore dollar property will now need

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<v Speaker 1>to pay an additional $3 million in additional buyer stamp

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<v Speaker 1>duty or a BS D

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<v Speaker 1>for Singaporeans who are buying their second home. The rate

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<v Speaker 1>went up from 17% to 20% which means if they

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<v Speaker 1>were purchasing the same $10 million property, they will need

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<v Speaker 1>to pay an additional $300,000 more in A BS D. Now,

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<v Speaker 1>what do you guys think the government is hoping to

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<v Speaker 1>achieve with these measures.

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<v Speaker 2>Christine, the cooling measures was more to curb investment demand

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<v Speaker 2>both from locals as well as foreigners or foreigners is

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<v Speaker 2>mainly because

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<v Speaker 2>of these people are coming in perhaps to set up

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<v Speaker 2>a family office. We do see some of these headline

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<v Speaker 2>deals where some of them were paying quite high prices

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<v Speaker 2>for some of the ultra luxury homes in the market.

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<v Speaker 2>So we are expecting more mainland Chinese to come in

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<v Speaker 2>as well since they have opened their international borders. And

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<v Speaker 2>ever since they have made the announcement, end of last year,

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<v Speaker 2>we are already receiving a lot of inquiries from these people.

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<v Speaker 2>So if they were to pick up many of these

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<v Speaker 2>luxury homes, it may potentially

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<v Speaker 2>bring up prices especially in the core central region. And

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<v Speaker 2>of course, when prices continue to rise in the luxury segment,

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<v Speaker 2>it may bring up the overall price for the whole

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<v Speaker 2>property market as well.

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<v Speaker 1>And of course, Ismail the $10 million question is, do

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<v Speaker 1>you think it will work? That's really the big question

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<v Speaker 1>just increasing the foreigner stamp duty by doubling it from 30%

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<v Speaker 1>to 60%. Will it work? Honestly? I'm not so sure

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<v Speaker 1>because looking at the data for last year, a good 90%

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<v Speaker 1>of the buyers were actually Singaporeans and pr in any market.

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<v Speaker 1>If 90% are creating the demand to push the price

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<v Speaker 1>further up, how can a 10% make a huge difference?

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<v Speaker 1>And this is something that I'm quite puzzled, why do

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<v Speaker 1>we need to hit the foreigners so hard? I accept

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<v Speaker 1>that we have

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<v Speaker 1>protect the Singaporeans and Pr and I for that, really

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<v Speaker 1>welcome the introduction of not increasing the Singaporean and the

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<v Speaker 1>pr for the first purchase. That's really the right thing

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<v Speaker 1>to do. But the thing here is this, when we

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<v Speaker 1>look at the data again, the foreigners to be exact

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<v Speaker 1>was less than 5% the whole of last year. And

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<v Speaker 1>including those people who are buying the 2nd and 3rd

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<v Speaker 1>property for investment purposes, who are subjected to the

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<v Speaker 1>higher additional stamp duties also come to about 10%. So

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<v Speaker 1>that's why we are not. So sure will this have

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<v Speaker 1>really an effective tool to put the price in check

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<v Speaker 1>if the demand is still strong and Singapore property market

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<v Speaker 1>has always shown to be resilient. But if they didn't

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<v Speaker 1>do this, what could they have done? I think one

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<v Speaker 1>of the key things that we could have really look

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<v Speaker 1>at it here is from the perspective of welcoming foreigners

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<v Speaker 1>but not at the expense,

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<v Speaker 1>Singaporeans and pr wanting to purchase the first home. Therefore,

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<v Speaker 1>rather than making it a 60% straight for the foreigners

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<v Speaker 1>purchasing the property, it could have been tiered, for example,

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<v Speaker 1>I'm OK with the 60% for foreigners, but maybe for

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<v Speaker 1>the price tag of the property for the 1st $10

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<v Speaker 1>million because I don't think the Singaporean or the pr

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<v Speaker 1>who are purchasing the first property are looking at the

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<v Speaker 1>above the $10 million mark.

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<v Speaker 1>But foreigners buying above $10 million mark, we could have

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<v Speaker 1>calibrated it into probably again, higher than the past 30%

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<v Speaker 1>maybe to 40%. Therefore, we still give a clear signal

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<v Speaker 1>to foreigners. You have to pay additional stamp duties at

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<v Speaker 1>the same time as far as you want to buy

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<v Speaker 1>any properties in Singapore below the $10 million mark, you

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<v Speaker 1>will have to pay a hefty price of 60% because

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<v Speaker 1>we want to treat

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<v Speaker 1>Singaporean and Pr F, Christine, how do you expect these

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<v Speaker 1>changes to impact property prices?

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<v Speaker 2>The cooling measures will have impact on different groups of buyers.

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<v Speaker 2>First time buyers will not be affected because they don't

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<v Speaker 2>pay A BS D for their first properties. But we

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<v Speaker 2>are looking at investment demand, they already own more than

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<v Speaker 2>one property. Then most likely these people will be affected

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<v Speaker 2>because the A BS D has been increased across the board.

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<v Speaker 2>So uh with this change, we do expect

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<v Speaker 2>perhaps some of these investors, they may pull back on

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<v Speaker 2>their demand uh temporary, not because they cannot afford, but

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<v Speaker 2>some people may just want to observe the market a

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<v Speaker 2>while more. Some others may also be hoping for prices

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<v Speaker 2>to fall after cooling measures. We do expect some pullback

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<v Speaker 2>in demand from some of these foreign buyers and investors

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<v Speaker 2>because these are the group of people where the A

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<v Speaker 2>BS D increase the most. So as demand contracts, you know,

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<v Speaker 2>for some of these buyers

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<v Speaker 2>where most of these people, they will be buying perhaps

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<v Speaker 2>uh homes in the luxury segment or city fringe areas.

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<v Speaker 2>And these properties usually command higher prices. So when demand contracts,

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<v Speaker 2>it also means that the overall price index may fall

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<v Speaker 2>a little. So because of that, we have adjusted our

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<v Speaker 2>price projections slightly lower from 5 to 8% for this

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<v Speaker 2>year to 4 to 7

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<v Speaker 1>percent. Ismail. Do you agree after the cooling measures, I

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<v Speaker 1>have revised my forecast.

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<v Speaker 1>In fact, at the start of the year, we expected

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<v Speaker 1>the new launches to sell in the tune of 8

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<v Speaker 1>to 9000 units because we are expecting almost 12,000 units

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<v Speaker 1>to be launched this year.

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<v Speaker 1>But because of the current cooling measures and the sentiments broadly,

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<v Speaker 1>I've reduced the likely sales number to be anything between

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<v Speaker 1>6005 to 7005. And that easily a drop about 20%

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<v Speaker 1>from the initial forecast. That's as far as the volume

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<v Speaker 1>is concerned for the new launches in terms of price point. Initially,

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<v Speaker 1>we expected the prices to go up by anything between

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<v Speaker 1>7 to 8.

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<v Speaker 1>But I think now I want to be a bit

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<v Speaker 1>more modest, probably 4 to 5%. But the mere fact

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<v Speaker 1>that the first quarter, we already have a 3.3%. I

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<v Speaker 1>think the next few quarters, we are going to see

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<v Speaker 1>a very lukewarm, maybe a very low below one or

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<v Speaker 1>towards the 1% increase likely to hit 4 to 5%

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<v Speaker 1>for the rest of the year. So prices will moderate

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<v Speaker 1>slightly this year. But will there be an

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<v Speaker 1>impact on demand resulting from these measures especially in the

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<v Speaker 1>current economic environment? That's

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<v Speaker 2>a good question. You are right. Although FT has indicated

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<v Speaker 2>that they may ha their rate hikes for a while,

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<v Speaker 2>but interest rate still remain quite high. So therefore some

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<v Speaker 2>of these buyers, they may feel that mortgage payments may

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<v Speaker 2>still be quite substantial, especially if they are buying a

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<v Speaker 2>property in the resale market. There will be a few

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<v Speaker 2>things that the buyers will have to content

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<v Speaker 2>with like inflation. The high interest rates uncertainties in the market,

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<v Speaker 2>there is still limited stock in the market. Supply is

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<v Speaker 2>still not coming in fast enough to meet demand for

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<v Speaker 2>some of these segments, especially like for example, the suburban

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<v Speaker 2>area where most of the H DB upgrader would want

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<v Speaker 2>to buy a property. And we do know that many

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<v Speaker 2>of these flat owners, they have sold their flats for

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<v Speaker 2>quite high prices. They do have quite a considerable sum

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<v Speaker 2>of money

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<v Speaker 2>to perhaps, you know, upgrade to a condominium. Some

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<v Speaker 1>of the key challenges right now we are facing here

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<v Speaker 1>is this developers' margins are thin. And the main reason

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<v Speaker 1>here is that the land costs are not cheap. When

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<v Speaker 1>you look at most of the G L s, it

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<v Speaker 1>has been well above the $1000 mark or some slightly lower.

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<v Speaker 1>But by and large, they are more than $1000 per

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<v Speaker 1>square foot per plot ratio

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<v Speaker 1>and taking into consideration of the construction costs and inflation. Today,

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<v Speaker 1>most of the new launches are going at $2000 and

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<v Speaker 1>above per square foot and yet the developers' margins are

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<v Speaker 1>relatively thin. So how much can the

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<v Speaker 1>developers reduce prices if your profit margin is barely 10%

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<v Speaker 1>are slightly above? Therefore, I don't think this is going

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<v Speaker 1>to have a huge reduction in price points for any

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<v Speaker 1>of the buyers who are looking forward to think that

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<v Speaker 1>there might be a correction but certainly developers are going

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<v Speaker 1>to be sensitive to the pricing. But when I say sensitive,

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<v Speaker 1>I think it is more likely to be for the

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<v Speaker 1>core central region

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<v Speaker 1>but not for the mass market to put things in

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<v Speaker 1>perspective the whole of last year in the mass market

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<v Speaker 1>O C R outside the central region, the foreigners purchase

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<v Speaker 1>was only 1.5% which means 98.5% for Singaporeans. And pr therefore,

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<v Speaker 1>the

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<v Speaker 1>demand is truly real from the aspirations of Singaporeans and

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<v Speaker 1>pr who are prepared to pay the money. So how

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<v Speaker 1>much can the price be corrected if this group of

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<v Speaker 1>people and their aspiration is to own a private property

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<v Speaker 1>in the mass market continue to come and pick up

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<v Speaker 1>the units

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<v Speaker 1>just to recap the cooling measures. Are mainly targeting foreigners.

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<v Speaker 1>But as they are such a small proportion of buyers,

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<v Speaker 1>it remains to be seen how much of an impact

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<v Speaker 1>this will have on the property market. Our market watchers

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<v Speaker 1>say prices may moderate slightly but will unlikely drop too

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<v Speaker 1>much as developers cope with high land prices and resilient demand.

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<v Speaker 1>There are other factors at play as well as investors

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<v Speaker 1>are facing a tough economic environment and high interest rates.

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<v Speaker 1>So the first condominium launch since the A BS D

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<v Speaker 1>hikes were announced was blossoms by the park in one north.

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<v Speaker 1>It sold about 75% of its 207 units at its

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<v Speaker 1>weekend launch and 96% of buyers were Singapore citizens and

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<v Speaker 1>Pr s now, will we see this kind of take

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<v Speaker 1>up for the remaining projects being completed this year? Despite

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<v Speaker 1>the measures,

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<v Speaker 2>there are still many buyers in the market like for example,

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<v Speaker 2>first timers who are not affected by the cooling measures

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<v Speaker 2>and they will proceed to buy. This could be a

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<v Speaker 2>buying opportunity because many of the foreign buyers who have

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<v Speaker 2>exceeded the market. Some of them may feel that prices

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<v Speaker 2>may stabilize for a while because of the cooling measures.

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<v Speaker 2>The supply that we are looking at is that about

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<v Speaker 2>a third will come from the outside central region which

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<v Speaker 2>are the suburban area.

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<v Speaker 2>20 over percent is from the luxury homes and another

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<v Speaker 2>30 over percent in the city fringe areas. So uh typically,

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<v Speaker 2>I think many of these first timers because they are

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<v Speaker 2>not affected by the cooling measures. Usually they will buy

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<v Speaker 2>homes in the city fringe areas and the suburban area.

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<v Speaker 2>So this year with more of this supply coming in

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<v Speaker 2>from these two market segments, we do see that perhaps

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<v Speaker 2>there will still be some price increase for some

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<v Speaker 2>these areas are because of the demand that is still

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<v Speaker 2>quite substantial or quite resilient. Whereas for the luxury market,

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<v Speaker 2>some of these high end buyers, um I think if

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<v Speaker 2>they are affected by the cooling measures, some of them

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<v Speaker 2>may take up citizenship or they may convert to pr

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<v Speaker 2>and then they could continue to buy properties as Apr

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<v Speaker 2>or new citizen because the A BS D rate is

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<v Speaker 2>lower for the ultra rich. They may still continue to

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<v Speaker 2>pay the A BS D. Some of them may just

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<v Speaker 2>hold back for a while uh while others may divert

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<v Speaker 2>their wealth to other asset classes or to other countries.

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<v Speaker 1>I think it will dampen the demand at least for

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<v Speaker 1>the next couple of months. It is very usual knee

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<v Speaker 1>jerk reactions from many people to monitor

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<v Speaker 1>and look at the outcome. But the concern has been

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<v Speaker 1>the prices despite many round of cooling measures have been

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<v Speaker 1>on the up trend positive. And if you look at

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<v Speaker 1>it for the first three months of 2023, the price

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<v Speaker 1>index indicates a 3.3% increase. So the concern. Really here

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<v Speaker 1>is this, if this goes unchecked,

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<v Speaker 1>will the Singaporeans and the pr especially those who want

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<v Speaker 1>a roof as a first timer, will they be out

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<v Speaker 1>place looking at it from a bigger scheme of everything?

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<v Speaker 1>As long as the property price keeps going up, there

0:13:00.000 --> 0:13:03.229
<v Speaker 1>is an effect and that's the main concern.

0:13:03.580 --> 0:13:06.000
<v Speaker 1>I think the other key point here is this, can

0:13:06.010 --> 0:13:10.510
<v Speaker 1>we have a sustainable growth looking at the property price

0:13:10.520 --> 0:13:15.619
<v Speaker 1>index particularly for the private sector in year 2021, it

0:13:15.630 --> 0:13:21.239
<v Speaker 1>was about a 10.6% increase and last year was 8.6%.

0:13:21.380 --> 0:13:25.219
<v Speaker 1>And for the first three months is 3.3%. Are we

0:13:25.229 --> 0:13:27.289
<v Speaker 1>expecting another double digit

0:13:27.559 --> 0:13:31.630
<v Speaker 1>then? Is this sustainable? Imagine just property prices going up

0:13:31.640 --> 0:13:35.000
<v Speaker 1>by over 30% in the last three years? But the

0:13:35.010 --> 0:13:39.429
<v Speaker 1>pace and the increment of the salaries of the younger

0:13:39.440 --> 0:13:43.049
<v Speaker 1>generations cannot keep pace with it. So that's the truth

0:13:43.059 --> 0:13:46.640
<v Speaker 1>of the matter. So it is in a way pre emptive.

0:13:46.650 --> 0:13:48.630
<v Speaker 1>I think the government is looking at the

0:13:48.715 --> 0:13:51.983
<v Speaker 1>data where it is moving and they want to curb

0:13:51.994 --> 0:13:55.205
<v Speaker 1>it at the nip right now. Finally, do you think

0:13:55.215 --> 0:13:57.395
<v Speaker 1>that the new cooling measures may end up pushing up

0:13:57.405 --> 0:14:00.405
<v Speaker 1>demand for the Singapore rental market which hit an all

0:14:00.414 --> 0:14:03.074
<v Speaker 1>time high in the first quarter of this year. We

0:14:03.085 --> 0:14:05.265
<v Speaker 1>are not really so sure how many of the foreign

0:14:05.275 --> 0:14:08.414
<v Speaker 1>buyers are prepared to pay the 60%. Some may but

0:14:08.424 --> 0:14:09.765
<v Speaker 1>we are really not so sure.

0:14:10.210 --> 0:14:12.989
<v Speaker 1>But it also means that foreigners who still look at

0:14:13.000 --> 0:14:17.179
<v Speaker 1>Singapore as a safe haven, setting up their businesses or

0:14:17.190 --> 0:14:20.530
<v Speaker 1>their child going to school may opt for rental for

0:14:20.539 --> 0:14:23.719
<v Speaker 1>the time being instead of paying a 60% A BS D.

0:14:23.729 --> 0:14:27.020
<v Speaker 1>How about they stay for another 23 years in rental

0:14:27.049 --> 0:14:30.859
<v Speaker 1>and apply for APR eventually because once they get their

0:14:30.869 --> 0:14:35.869
<v Speaker 1>pr status from a 60% additional stamp duty, it drops

0:14:35.880 --> 0:14:36.080
<v Speaker 1>to five,

0:14:36.182 --> 0:14:39.911
<v Speaker 1>5%. Therefore, it does make sense. Once someone who is

0:14:39.921 --> 0:14:42.742
<v Speaker 1>truly interested in Singapore as a place, they want to

0:14:42.752 --> 0:14:45.271
<v Speaker 1>have their roof. I don't think it is going to

0:14:45.281 --> 0:14:49.312
<v Speaker 1>totally deter them to come into Singapore rental might be

0:14:49.322 --> 0:14:53.271
<v Speaker 1>a possible option, which means I think some of the

0:14:53.281 --> 0:14:58.202
<v Speaker 1>bigger properties and the luxury properties, the rent will stay

0:14:58.211 --> 0:15:01.002
<v Speaker 1>firm and may even be in greater demand

0:15:02.153 --> 0:15:04.864
<v Speaker 2>is that more tenants are shifting downstream. We have observed

0:15:04.874 --> 0:15:08.064
<v Speaker 2>more aspects and even locals, some of them, they are

0:15:08.073 --> 0:15:10.943
<v Speaker 2>shifting from the luxury market to city fringe and from

0:15:10.953 --> 0:15:14.193
<v Speaker 2>city fringe to suburban area. And for some of the aspects,

0:15:14.203 --> 0:15:17.223
<v Speaker 2>they are even going to the H DB market. H DB.

0:15:17.234 --> 0:15:20.244
<v Speaker 2>Rents have been rising across the island and in some

0:15:20.254 --> 0:15:23.184
<v Speaker 2>locations as well. And we do notice some of these

0:15:23.193 --> 0:15:27.554
<v Speaker 2>record rents that has been achieved. For example, there was

0:15:27.564 --> 0:15:28.023
<v Speaker 2>a unit

0:15:28.125 --> 0:15:32.666
<v Speaker 2>that was rented for $6500 per month. And I think

0:15:32.676 --> 0:15:34.976
<v Speaker 2>this is the highest rent. There has also been some

0:15:34.986 --> 0:15:39.596
<v Speaker 2>units that were rented for more than $5000 and for $6000.

0:15:39.606 --> 0:15:43.085
<v Speaker 2>And for the lower tier of those units rented out for,

0:15:43.096 --> 0:15:47.606
<v Speaker 2>let's say less than $3000 or $2500. The proportion has

0:15:47.616 --> 0:15:50.536
<v Speaker 2>been decreasing over the past few months. So this means

0:15:50.546 --> 0:15:53.935
<v Speaker 2>that affordable rents in the H DB market has been decreasing.

0:15:54.770 --> 0:15:57.539
<v Speaker 1>So to sum up, we've been unpacking what the latest

0:15:57.549 --> 0:16:01.450
<v Speaker 1>round of stamp duty increases means for the Singapore property market,

0:16:01.559 --> 0:16:04.900
<v Speaker 1>our experts are expecting a small drop in boat sales

0:16:04.909 --> 0:16:09.320
<v Speaker 1>volume and prices. However, rents could go up as potential

0:16:09.330 --> 0:16:11.869
<v Speaker 1>buyers hit by higher A BS D turn to the

0:16:11.880 --> 0:16:13.380
<v Speaker 1>rental market instead.

0:16:14.109 --> 0:16:16.419
<v Speaker 1>But in the long run, the market will also be

0:16:16.429 --> 0:16:20.979
<v Speaker 1>shaped by other factors. One of these being high land prices,

0:16:21.599 --> 0:16:24.969
<v Speaker 1>the market is also supported by the demand for property

0:16:24.979 --> 0:16:29.250
<v Speaker 1>investing among Singaporeans and permanent residents and they account for

0:16:29.260 --> 0:16:30.989
<v Speaker 1>the vast majority of buyers

0:16:31.630 --> 0:16:35.700
<v Speaker 1>looking further ahead with prices still buoyant despite multiple rounds

0:16:35.710 --> 0:16:39.049
<v Speaker 1>of cooling measures. There's also the question of whether further

0:16:39.059 --> 0:16:41.000
<v Speaker 1>duty rises are sustainable

0:16:41.500 --> 0:16:43.849
<v Speaker 1>and that's the five things you need to know about

0:16:43.859 --> 0:16:47.390
<v Speaker 1>Singapore's latest property tax hikes. A big thank you to

0:16:47.400 --> 0:16:50.400
<v Speaker 1>my guest Christine Sun, Senior Vice President of Research and

0:16:50.409 --> 0:16:55.090
<v Speaker 1>Analytics at Orange T and Thai and Ismael Gao, CEO

0:16:55.099 --> 0:16:58.330
<v Speaker 1>of prop realty. Catch money. Mind on C N A

0:16:58.340 --> 0:17:01.150
<v Speaker 1>and online at me, watch C N A dot Asia

0:17:01.159 --> 0:17:02.280
<v Speaker 1>and youtube.