5 Singapore Property Trends to Watch in 2019
The same winds are continuously buffeting property trends all across the globe; the rising cost of capital increased government regulations and uncertainty in the global trade industry. According to a Knight Frank report, Singapore comes tops in property prime prices over the 12 months leading to the end of Q3 2018. In particular, the report cites “limited availability of prime properties” as well as a positive market outlook for the first six months of 2018.
However, there are various efforts by authorities in the city-state to cool off the rise in prices. In Q3 2018, the price of prime property weakened up to 1.7% as the various measures come to bear. At the moment, and in future dates, the barriers to new entrants into the landed property market is quite higher. As such, fewer people are getting into the market which is affecting prices and the market outlook on the supply side.
Being a prime location for expats in the South East Asian region, analysis of the key trends in the city state’s property market is essential. In light of this, the following are the critical property trends that will define 2019.
Decreased demand for prime properties
According to a recent survey, Singapore is still a favorite dwelling place for expats. Interestingly, the report cites the family benefits that people earn in the city-state as one of the major points of attraction. However, the same research notes that of the 22,318 expats surveyed, 46% said it is much more stressful to work in Singapore than anywhere else. As such, it is possible for 2019 to see a decreased number of expats living in Singapore.
Interestingly, expats are the largest market for Singapore’s prime properties. With their numbers depressed, prime properties are likely to see decreased demand. Meanwhile, the number of Singaporeans moving abroad in search of better work-life balance is on the increase. This is due to the narrative that work-life balance is fair in other countries abroad. Given that these Singaporeans that move abroad make up a substantial segment of the prime property market, demand will fall.
Property development might slow down
Singapore is among the world’s most competitive economies. As such, the city-state is very intricately connected to the ebb and flow of the global economy. This is to say that the country is very vulnerable to international shocks. Interestingly, there is an ongoing push and pull between China and the US, an incidence which might significantly affect the economic performance of Singapore.
External shocks play an essential role in the flow of capital in the city-state. As such, if the trade war were to escalate in 2019, much of global trade will be affected. Further, this will significantly affect the extended bull-run that kicked off after the last financial crisis.
Also, inflation figures in Singapore have failed to meet estimates for the third quarter of 2018. All these factors put together will affect the flow of finances within the country. As such, one should expect development activity to fall in 2019.
After the all-time peak in the residential price index in Singapore during Q3 2013, the government put in place cooling measures. At the heart of the measures was the need to curb the “irrational exuberance” that was taking root in the market. As a result, the prices began weakening until mid-2017. However, the prices are on the rise again.
During the third quarter of 2018, Singapore’s Residential Property Price Index rose to 149.7. This is to say that the quarter saw one of the highest price increases yet since the government curbs of 2013. However, if the increase sustains into 2019, we are likely to see the government step in again to introduce further curbs to stabilize the price.
Rent could rise
Ironically, while the property prices in Singapore are on the rise, the value of rent is going in the opposite direction. In particular, the rental index for residential property has been on the decline since Q3 2013. This is around the same time when the residential price index was at its all-time high. As such, it is safe to say that the relationship between the residential price index is inversely proportional to the rental index for residential price index.
With government curbs set to increase, there will be higher barriers to entry for new property owners. As such, many more people might resort to renting out apartments. Notably, this implies that demand for rental houses will hike. As such, the natural laws of demand and supply dictate that rental index will be on the increase.
Before the property curbs, many projects were underway. According to Urban Redevelopment Authority (URA), 6,626 units were under construction in 2018. For 2019, 8,124 units will be under construction. Although 2020 and the years to follow will have fewer units, the number of buyers will still be quite low.
Add to this, the units expected to begin construction which already has written and provisional permission. As such, there will be much more units in the market.
In particular, authorities in Singapore raised the Additional Buyer’s Stamp Duty (ABSD) rates. Therefore, this means that it is more challenging to access Loan-to-Value (LTV) for home purchases. This is to say that new homeowners will have more barriers accessing houses. With the ongoing housing projects unaltered, it means that there will be many units on the market.
The bottom line
A lot is going on in Singapore. Inflation rates are not meeting targets, and the government is making it more challenging to access housing. Therefore, we are more likely to see the trends above play out in 2019. Particularly, the number of young and first-time homeowners will determine the overall behavior of market trends. However, the government is also going to play a huge role in determining the trends in the market. If the current curbs continue, the market is likely to experience supply gluts. This is because there are ongoing projects which rely on the overall demand for the year 2018.