Over the past two years, despite the raging pandemic and border closures, property prices in Singapore have been on an upward trend. According to data from Singapore’s Ministry of National Development (MND), private home prices even saw a 10.6% increase last year.
In response, the Singapore government introduced cooling measures at the end of last year, including raising the Additional Buyer’s Stamp Duty (ABSD), tightening the Total Debt Servicing Ratio (TDSR), and increasing the minimum down payment for loans.
However, with the reopening of borders, an increase in expatriates and foreigners entering Singapore, the recovery of industries like tourism, construction, and hospitality, coupled with low loan interest rates (1 – 1.8%) and a reduced number of new condominium projects, what will the trend for private residential prices in Singapore be in 2022? This article will analyze the 6 major predictions for Singapore’s property price trends in 2022.
Let’s first look at the specific cooling measures:
• The Additional Buyer’s Stamp Duty was raised by 5% – 15%, with the exception of Singapore citizens and Permanent Residents (PRs) purchasing their first property.
• The Total Debt Servicing Ratio threshold was tightened from 60% to 55%, which also applies to refinancing existing home loans.
• The minimum down payment for HDB loans was increased from 10% to 15%.
So, how will these cooling measures affect Singapore’s real estate trends?
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Trend 1: Private Residential Price Growth Will Slow Down in the Short Term
The significant increase in the Additional Buyer’s Stamp Duty will have the greatest impact on foreign buyers and investors, with a relatively smaller effect on Singapore citizens and Permanent Residents.
This means that the consistently rising private residential market will be the most affected. In the short term, the growth of long-rising private home prices will slow, and transaction volumes will decrease. However, with the launch of new projects, economic recovery, and an improved employment situation, the private residential market is expected to regain vitality in the second quarter.
Trend 2: Buyers with Genuine Needs Will Have More Options
The main objective of the government’s current round of cooling measures is to ensure that Singapore citizens and Permanent Residents—buyers with genuine needs—can afford and secure a home. Therefore, for these buyers, this round of measures brings more benefits than drawbacks.
The across-the-board increase in the Additional Buyer’s Stamp Duty can effectively dampen the purchasing enthusiasm of foreign buyers and investors. Coupled with the government’s increased supply of HDB flats and private housing, Singapore citizens and Permanent Residents will have more housing options.
However, as the minimum down payment for HDB loans has been raised from 10% to 15%, families with limited savings may need to wait a little longer.
Trend 3: The Resale HDB Market Will Remain Strong
Although the government will increase the supply of new HDB flats, a considerable portion of Singaporeans will still opt for resale flats.
This is due to reasons such as long waiting times for new flats, cumbersome processes, and more risk factors. This is especially true for first-time homebuyers and upgraders who are eager to move into a new home, as they prefer resale HDB flats that are ready for immediate occupancy.
In summary, the resale HDB market will continue to remain active and heated.
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Trend 4: The Private Condominium Market Will Stabilize
In 2021, the price trend for condominiums in Singapore was stable, with all 31 private condominium projects launched experiencing strong demand. The buyers for these condominiums were partly HDB upgraders and partly investors hoping to lock in properties before prices rose further.
Due to the limitations of the Singapore Government Land Sales (GLS) program, there will be fewer new private condominium launches in 2022, meaning the overall new private residential market will be more stable.
Long before the government announced the new round of cooling measures, there were rumors that en-bloc sales might see a resurgence. For developers, if they cannot secure new land, the collective sale of older condominiums is one way to acquire land. However, the increase in the Additional Buyer’s Stamp Duty has dispelled these rumors—developers would need to pay an ABSD of up to 40%.
Furthermore, since the majority of condominium buyers are foreigners and investors—the two categories primarily targeted by the new cooling measures—it can be predicted that the Singapore condominium market will be more stable in 2022.
According to analysis from AnjiaSG, Singapore condominium prices are expected to rise by only about 3% – 5% in 2022. (This could be a good time to buy for long-term investors and families with genuine needs).
Trend 5: Investment-Driven Property Purchases Will Slow Down
This round of property cooling measures will have a certain impact on both local Singaporeans and foreign investors.
Firstly, the Additional Buyer’s Stamp Duty that foreigners need to pay when investing in property in Singapore has risen to a staggering 30%. Naturally, the investment appetite of foreign investors will decrease.
Additionally, even for locals, if you want to buy a second property for investment, you will need to pay a high ABSD of 17%. This makes the return on investment worth reconsidering.
Besides these, the TDSR threshold has also been raised, tightening from 60% to 55%, meaning monthly loan repayments cannot exceed 55% of one’s gross monthly income. This makes it difficult for investors to manage loans for two residential properties.
In summary, investment-driven property purchasing activities in the Singapore real estate market will slow down in 2022.
Trend 6: Rental Prices Will Continue to Rise
In 2022, after being closed for two years, Singapore will gradually reopen its borders. With the expansion of the Vaccinated Travel Lane (VTL) scheme, more students and business professionals will be coming to live in Singapore. Therefore, it is anticipated that rental prices in Singapore will continue to rise.
Interestingly, even with only domestic demand, the rental market in Singapore remained active in 2021. The main rental demand came from millennials working from home who needed their own space, newly married couples unwilling to wait long for their HDB flats, and people in the process of moving.
According to AnjiaSG’s forecast, with the opening of borders and increasing demand, the rental market in Singapore will be even hotter in 2022, and rental prices could rise by 8% – 11%, or even higher.
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