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