Ravi Chandran
Former Member of Parliament for Ang Mo Kio, Mr Inderjit Singh, raised questions on private property affordability for local home buyers.
Linking a Straits Times article on new private home sales data for April, Singh said, “Property as an investment instrument by foreigners just drives prices up. How affordable will private property be for Singaporeans in the future?”
New private home sales stabilised in April, with a rise in luxury home sales and a growing number of foreign buyers despite property cooling measures. Buyers snapped up 653 new private homes last month, on a par with the 654 in March, according to Urban Redevelopment Authority (URA) data released on Tuesday (May 17). Developers rolled out 397 new homes last month, up 28. 5 per cent from 309 in March.
Luxury homes sales rose in April, with 115 units sold for at least $3 million each, up from 89 units in March, based on URA`s Realis data. Foreign buyers snapped up 59 non-landed private homes (excluding ECs) last month, more than double the 25 units in March. Most of the units sold to foreign buyers were in the core central region and city fringe.
Overall, private homes in the city fringe accounted for 44.3 per cent of the total sales volume last month. The increase in luxury home purchases and foreign buyers indicates that investors continue to view properties in Singapore favourably despite the cooling measures. The additional buyer’s stamp duty (ABSD) is 30 per cent for foreigners buying any residential property. Analysts believe that the lifting of travel restrictions, imposed to curb the spread of the coronavirus, has boosted foreign buyers’ confidence.
Sales in the core central region surpassed those in the suburbs, despite the greater impact of property curbs on the high-end market segment. The lack of major mass market launches hindered overall developers’ sales amid higher ABSD rates and rising interest rates.
With the anticipated increase in mortgage interest rates, prudent home buyers could try to right-size their purchase, by opting for smaller units with a more manageable price quantum.
But the private residential market still showed healthy demand, supported by Housing Board upgraders on the back of strong HDB resale prices.
The property analysts said demand could pick up in May with new launches such as the 407-unit Piccadilly Grand in Farrer Park and 298-unit LIV @ MB in East Coast. Piccadilly Grand had sold 315 out of its 407 units during its launch weekend earlier in May, indicating an interest in mixed-use projects and renewed confidence in Singapore’s economy and residential market.
Mr Paul Ho, chief officer at iCompareLoan said, “home prices have become more unaffordable around the developed world as a consequence of excess liquidity and low cost of debt over the past 15 years or so and home prices rose much faster than the increase in household incomes.”
“The greatest impact of this has been felt by our younger generations in global cities who find it increasingly difficult to afford to buy a home,” he added.
Private property affordability in Singapore is not impacted much because of Government interventions
But the Singapore’s housing market largely stayed out of this conundrum because the Government acted by introducing measures to cool its housing market since 2010.
This policy stance, together with a very sound and successful affordable public housing policy, has made Singapore’s housing market likely one of the most affordable of any major developed city in the world.
The Singapore government has since 2010, introduced a series of property curbs to cool Singapore’s housing market and to prevent cost of living from becoming too prohibitive for its citizens. Coupled with increasing supply and weaker sentiments, prices in Singapore’s housing market are likely to rise slightly this year.
One research report from 2019 pointed out that that private property affordability in Singapore is still relatively intact compared to those in top-ranked Hong Kong and that our average price growth is one of the lowest compared to the other 34 cities.
Having a sound and comprehensive housing policy that supports affordable housing and responding early to house price escalations has helped Singapore house prices become probably the most affordable of any developed city when measured as a multiple of household income.
In the light of this, there is little downside for owner occupiers and residential property investors in buying Singapore property.
Mr Ho said, “luxury homes in core central region are being snapped up because while housing supply grew by 3-4% p.a. in the previous years, upcoming housing completions are lower, growing at less than 2% annually in the last two years.”
“With less supply, a reduction in existing stock due to collective sales and growing demand as the employment market grows, rents will trend up, helping to support price growth,” he added.
“Most importantly, private property affordability is a very relative question. To get the right private property which fits you, you must first be able to secure the best home loans,” said Mr Ho.
“And for that you must speak to a trusted mortgage broker,” he added.
