Singapore Property Market – Trends To Watch Out For In 2019
Singapore has one of the fastest growing and mature property markets in the world and as such, it has attracted a lot of investors. However, many of the country’s citizens are worried because rapid growth has also led to high property prices, thus making it harder for locals to access affordable housing deals.
Singapore’s property market was characterized by various trends in 2018 such as land scarcity leading to fierce bidding for the available land. Of course, developers end up pushing the costs to the final consumer and so in this case, new property units were steeply priced. The year is almost coming to an end and so the property market players in Singapore have to anticipate 2019’s property market trends. Below are some of Singapore property market trends that will likely take place next year.
Real estate prices could continue to go up
The current trend in the market involves higher property prices as developers work towards recovering from the higher land prices and construction costs. The rising prices are also the result of better economic performance, as well as the growing housing demand. The rising costs effect will most likely roll over into 2019 and so potential property buyers should brace themselves.
The government recently introduced a new tax policy change in July this year. The changes include a 5 percent higher Loan-to-Value (LTV) ratio even for those buying their first homes and Buyer’s Stamp Duty (ABSD) increased by 5 percent. This means that developers will have to shell out 25 percent more money to cover land tax costs which were previously set at 15 percent if the land is being purchased for development purposes.
The ABSD rate increment will also apply to Singapore residents and this means that both developers and buyers will be subjected to higher tax rates. The result will be more burden on the buyers since the effect will be higher property prices.
The rising property rates will likely slow down Singapore’s property market as buyers shy off despite the demand, thus leading to low sales. Such a trend will definitely influence decisions as most players in the property industry evaluate the market to determine the best way forward.
Government measures to maintain low property prices
The government will likely introduce new measures that will be aimed at ensuring low property prices since the Singapore property market has been experiencing steep prices for the better part of 2018. The government previously intervened in 2013 when housing prices escalated to alarming levels. However, the government measures worked and they resulted in falling prices for the past few years.
Government intervention would, therefore, be a welcome relief especially for buyers since property prices will be steered towards affordable levels. It is also highly likely to happen because the market is currently experiencing a price hike and also because the government has previously intervened successfully for some time.
Foreign investors will be less interested in the Singapore market
The current situation in Singapore’s real estate market might make it less interesting to foreign investors because property prices are already too high. Most investors look for investment opportunities when prices are low so that they can fully reap the benefit over time as prices increase. The old principle of buying low and selling high definitely applies to the property market.
The rising land prices and the heavy competition in the market make Singapore’s property market less appealing to foreign investors. This applies to both developers and foreign buyers. RHB data revealed that the Singapore property market only registered 5 percent foreign buyers in Q2 of this year. The figure is quite a large decline compared to about 20 percent foreign buyers in Q2 of 2010 and 2011.
The decline corresponds with the rising property prices and the other factors mentioned above. The same trend will likely continue in 2019 which means that the market will likely continue to slow down.
Prevailing pessimistic approach
Singapore is heavily dependent on global trade and that is currently a major problem especially for its property market because the country is on trade wars with the U.S and China. Experts have therefore adopted a pessimistic outlook on Singapore’s economic performance in 2019 and the impact of those trade wars will likely trickle down to the property market.
The Singapore dollar has been losing value against the U.S dollar since the start of this year and interest rates are affected as a result. Unfavorable interest rates are bad news for the property market because. For example, construction inputs especially those that are imported become more expensive, adding to the final cost and thus property becomes more expensive.
The current economic climate is thus not promising for the property market and if the Singapore dollar continues to lose value, then it will lead to higher interest rates. The latter means buyers will have to pay more to acquire property.
What Singapore residents think of the current property market situation
PropertyGuru recently carried out a survey which revealed that Singapore residents are disappointed by the rising prices in the country’s real estate market. Most of them believe that property prices will continue to rise. They are disappointed because it means they will have to pay more money to purchase property that would have been significantly cheaper a few years ago.
Property sellers are also hoping for a market recovery so that they can sell their property. The pricey market conditions are making it difficult for sellers to strike deals. Almost half of the respondents in the survey are convinced that the government should ease its cooling measures so that the market can enter recovery mode.
Singapore’s property market will likely experience a slow year in 2019 given the above factors. Buyers, sellers, and developers have been forced to adopt a cautious approach following the government’s new tax policy. The market is also full of uncertainties especially due to ongoing trade wars which could end up having a significant negative effect on the property market in 2019.