Recently, the Government of Singapore introduced a few measures that have as main objective the cooling down of the increasing demand present on the property market (on both new launch condo and resale condo) of the country. The latest measure was to increase the stamp duty, especially in the case of property buyers that were looking to get their second or third property. Besides this, the loan-to-value ratios also became more rigid, all of these chances making property ownership more expensive than before. According to Augustine Tan, who is the president of Real Estate Developers’ Association of Singapore, these cooling measures are triggering a significant setback for the real estate market. The truth is that the new measures diminished the demand coming from foreign buyers and investors and, as Augustine Tan said, may have a detrimental effect on the trust shown so far from developers and investors.
The same president of REDAS mentioned the fact that it is important to keep an eye on the effects these new measures will have on the property market, in order to avoid unwanted consequences. Even if a certain effect doesn’t seem to be too significant, there are always chances for it to develop in unexpected ways. At the property market update seminar that took place this year, at the Orchard Hotel, Augustine Tan talked about several aspects that should be in the interested of both the authorities and developers alike. One of these aspects was the fact that the market in Singapore just started its first year of recovery, so sufficient time wasn’t allowed for it to set its own course. Because the market set itself on an upward trend, the demand was a natural effect, and, eventually, it would have reached a balance between supply and demand.
At the moment, forecasts point toward the fact that the dampening measures will exacerbate the fact that the current supply is slightly higher than the demand. Because the number of transactions will slow down, not just in 2018 but also in the coming year, the number of unsold properties will also increase, fostering conditions that will favor a high supply scenario. At the same time, people that are looking to buy their first home will require more money, due to the shrinking of LTV ratios. But these new changes will affect the developers as well, which will have to reassess their strategies in order to face the imbalance created between supply and demand. Instead of rushing into adopting a set of cooling down measures, the country should encourage a property market that is alive and vibrant and foster steady growth in this sector. Such a thing would be benefic, not just for the country and its economy, but also for developers, investors, and homeowners.
In comparison to the previous cycles of the property market, this time the government chose to act much sooner than it was required. Considering that Singapore’s economy already has a set of steady fundamentals, all the risks that may have been triggered by changes in the local and global economic background, like the Brexit or trade challenges between the US and China, would have been successfully diminished without the need of such cooling measures. At the moment, it is not too late for the Government to reassess their plan and change their current decisions before the property market is influenced permanently.
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