Prime Minister Lee Hsien Loong delivered his speech at the National Day Rally on August 21, 2022, held at the ITE Headquarters in Ang Mo Kio. As with the past two years, the tone of the 2022 National Day Rally speech remained cautious.
Currently, the global situation does not inspire much optimism—geopolitical tensions are at an all-time high, and the world has not yet recovered from the COVID-19 pandemic. Nevertheless, government plans are in place. At the same time, these plans and the global situation have some potential implications for the real estate market:
⚠️ Note: We will detail the key points directly relevant to the property market, not necessarily in the order presented in the speech itself.
Key topics include:
- Relocation of Paya Lebar Airbase
- Changi East Urban District and Tuas Mega Port
- Unprecedented geopolitical tensions
- Attracting more foreign talent
- Low and middle-income families facing cost of living challenges
Table of Contents
1. Relocation of Paya Lebar Airbase
The Prime Minister mentioned in his speech that 150,000 new public and private homes will be built on the site of the current Paya Lebar Airbase. This plot of land, approximately 800 hectares in size, is more than enough to build an entirely new town. To give you a better sense of the scale, analysts predict that 100 to 130 Build-To-Order (BTO) projects could be developed here, with each project offering 700 to 1,500 units. As for private housing, it is estimated that 40 to 70 Executive Condominium and private condominium projects could be built, with each offering 500 to 1,000 units.
The relocation is expected to begin around 2030.
This information is not entirely new, as the Urban Redevelopment Authority (URA) had proposed related plans long ago. However, we can take the Prime Minister’s speech as the most significant and final confirmation. Besides creating a new HDB community, one of the most notable points is the change in the Gross Plot Ratio (GPR) for the surrounding areas.
Currently, some homes near Paya Lebar Airbase—including parts of Hougang, Marine Parade, and Punggol—are subject to strict building height restrictions. However, once the airbase is relocated, buildings in this area could potentially be built taller. This could trigger further redevelopment in the post-relocation area and might also improve the en bloc sale prospects for some private residential projects.
Furthermore, the relocation will free up space for more amenities such as shops, restaurants, and parks. This also means the surrounding areas may undergo significant upgrades. It is particularly noteworthy that the government has planned to transform the existing airbase runway (3.8 km long) into a “green spine” or community space. The URA’s master plan does indeed mark a “Runway Boulevard,” which is likely the vision for this stretch.
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2. Changi East Urban District and Tuas Mega Port
As the COVID-19 pandemic situation eases, the aviation industry is beginning to see a ray of hope. The development plan for Changi Airport’s Terminal 5 (T5), which was paused for two years, has been revived, with construction expected to start within two to three years.
Once T5 is operational, it will be able to handle up to 50 million visitors annually, more than Terminals 1 and 3 combined. The construction of the Changi East Urban District, adjacent to T5, is also underway, creating more opportunities for Singaporeans to work, connect, and play. This will be a commercial hub including hotels, serviced apartments, offices, and conference halls. Additionally, unlike the current Changi Business Park, the Changi East Urban District will feature an extensive waterfront area.
This plan will significantly improve the rental prospects for nearby properties. Many condominiums around Tanah Merah MRT station (including the new private residential project Sceneca Residence, set to launch in the third quarter of this year) may attract people working in the growing Changi hub; the same applies to condominiums along Upper Changi Road.
The construction of Tuas Mega Port has also resumed. Tuas Port is being developed in four phases. The first two berths of Phase 1 officially became operational at the end of last year, receiving ships from all over the world. By the end of this year, three more berths at Tuas Port will be opened. When fully operational in about 20 years, it will become the world’s largest automated port, capable of handling 65 million standard containers (TEUs) annually, nearly double the current capacity. This will position our country as a global leader in the maritime sector.
At that time, the new Tuas Port will replace the existing facilities of the four container terminals: Brani, Pasir Panjang, Tanjong Pagar, and Keppel. According to previous local media reports, operations from these southern terminals will begin migrating to the new Tuas Port from 2027. This will free up approximately 1,000 hectares of land in the Greater Southern Waterfront, and together with the Keppel Club and Sentosa areas, a total of 2,000 hectares of land will be available for future development.
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3. Unprecedented Geopolitical Tensions
In his speech, the Prime Minister warned of the instability that could arise from the Russia-Ukraine war and tense US-China relations.
Theoretically, war leads to rising prices for goods and energy, resulting in higher construction costs, which in turn affects the property market. However, looking at historical events, we find that the property market is not as susceptible to the impact of regional wars as the stock market. To date, our property market has been largely unaffected by these events. In fact, property prices sometimes rise as foreign buyers seek a safe haven for their capital in our real estate market. Therefore, the main factors causing price fluctuations are financial crises and domestic fiscal policies, rather than wars.
We have noticed other issues that affect property prices. One of them is the US Federal Reserve’s reaction to changes in energy prices. So far, the Fed has repeatedly raised interest rates to combat inflation. This has pushed up home loan rates in Singapore.
Nevertheless, if oil prices climb too high due to sanctions against Russia, the Fed may reconsider its stance and refrain from frequent rate hikes. This remains to be seen, as it has been less than a year since the conflict began.
Another influencing factor is the increase in trade barriers between the US and China, as we saw during the Trump administration. Retaliatory tariffs tend to increase costs for businesses on both sides; if US companies start to feel the pain from the pressure, this could also force the Fed to think twice.
Regardless, developers are generally concerned about construction costs. Generally, more expensive energy means higher construction costs. On the simplest level, this means higher costs for transporting construction materials, ferrying workers to and from sites, and so on.
We believe that other issues—such as higher Additional Buyer’s Stamp Duty (ABSD) and higher land bid prices—will have a greater impact on the property market than the war.
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4. Attracting More Foreign Talent
The Prime Minister mentioned in his speech that the Ministry of Manpower and the Ministry of Trade and Industry will have new initiatives to attract and retain top talent from overseas. We have not yet seen the full details, but the Ministry of Manpower has indicated that it will take steps to adjust the Employment Pass framework.
Landlords will benefit from these initiatives. Property prices in Singapore are very high for foreigners, especially after the ABSD hike in December 2021—therefore, we might see an increase in demand for condominium rentals. This will help sustain the momentum in the rental market, which has already hit a six-year high in 2022.
Retaining these foreign talents means long-term leases. Moreover, those who intend to stay in Singapore for the long term will likely have a demand for property purchases.
5. Low and Middle-Income Families Face Cost of Living Challenges
In addition to inflation, we have noticed that interest rates for property loans have been climbing. Rates above 2% are becoming the norm. In contrast, bank loan rates in 2020 were typically around 1.65% (though HDB loan rates remain at 2.6%).
The government is helping households cope with various expenses by distributing various vouchers, providing Conservancy Charges rebates, and other measures. However, an unresolved issue is the high utilisation rate of the Central Provident Fund (CPF).
When Singaporeans feel the pinch of daily expenses, they prefer not to pay their housing loans in cash. Therefore, we believe more Singaporeans will turn to using their CPF to pay for their housing loans, or a large portion of them. The government must closely monitor this risk to prevent the elderly from reaching their withdrawal limits or facing difficulties moving to new housing due to CPF refunds.
The rising cost of living for these groups could also lead to the introduction of cooling measures—especially regarding the rising Cash-Over-Valuation (COV) for resale flats. Resale flat prices are at an eight-year high, which poses a severe challenge for low and middle-income Singaporeans, especially as living costs are also rising (and not all Singaporeans can wait for a BTO flat to be built).
The overall message from this National Day Rally speech seems to be one of caution, but it is also very fair and realistic given the current global and social situation. Ironically, continued uncertainty may ultimately make housing more expensive; we have seen time and again that when the economy is down, Singaporeans (and Asians in general) prefer tangible assets like property and gold.
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