Singapore’s new policies aimed at tempering house-price gains were the latest government effort to address a growing lack of affordability in cities worldwide.

The Singapore government earlier this month introduced a five per cent increase to the Additional Buyers’ Stamp Duty (ABSD), which affects buyers of second and third properties. It also tightened lending standards, reducing the loan-to-value ratio limits for all home purchases by five percentage points.

Housing affordability has been a growing headache for governments globally. Hong Kong last month slapped a new tax on unsold homes in an attempt to curb rising prices, which have doubled in the last decade.

In Singapore, the average price of private homes rose 9.1 per cent in the past year, according to the Urban Redevelopment Authority.

“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” the Monetary Authority of Singapore (MAS) said.

“The key is to maintain a stable and sustainable property market,” says Regina Lim, Head of Capital Markets Research, Southeast Asia, JLL.

Lim anticipates that the government will continue to deliver policies aimed at ensuring private residential prices track income growth of three per cent to five per cent a year.

Impact on developers and investors

The cooling measures also hit developers, which will now have to pay 25 per cent remittable ABSD when acquiring private residential land, up from 15 per cent.

The market has been quick to react: bank and property shares fell on the back on the news.

“Such frequent policy changes increase uncertainty and risks for developers,” says Lim. “The remittable ABSD of 25 further deters developers from undertaking large projects, even though they can apply for remission if they complete the construction and sell all the units in the project within five years.”

Developers might also take into account the higher ABSD for buyers to offer some flexibility around pricing during launches although it is unlikely that there will be significant cuts.

Cooling demand could see investors directing their funds towards other markets and sectors, especially with rising global interest rates.

However, Lim feels that Singapore’s responsive regulatory framework may also still appeal to international investors as it indicates the city state’s desire to ensure stable prices.

“Singapore has always been an attractive destination to international investors, and the recent news that it’s the best-performing country within Asia for real estate transparency should continue to bode well for Singapore real estate,” she says. “Moreover, other cities may continue to adjust policies to ensure housing affordability just as they had over the last seven years to rein in disproportionate residential price escalations.”

For more information or to discuss Singapore's latest property measures, email Regina Lim, Head of Capital Markets Research, Southeast Asia, via the contact details listed below.

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