Stable cooling measures
With consistent cooling measures, the presence of Additional Buyer Stamp Duty (ABSD) and a slow economy, the Singapore residential property market for 2017 appears to be quite stable.
However, in the last quarter of 2016, the Singapore condo sales recorded impressive showing, turning in the year-on-year increase in sales volume consistently.
This can be visible thanks to various new condo launches among which are The Alps Residences, Forest Woods and newly launched Executive Condominiums such as The Terrace and Sol Acres.
Challenges for the Singapore property market in 2017
With the imposition of the 15% Additional Buyers Stamp Duty (ABSD) on foreign buyers and second-time Singaporean buyers, which has made Singapore property more expensive comparing and a weak economy, property investors may remain cautious before buying.
Tricia Song from Colliers states that a slowing economy, potential higher job cuts and impending interest rate hikes will affect households’ ability to service mortgages.
“For investors who bought private residential units for investment 3-4 years ago, rising vacancy rates and falling rents coinciding with interest rate hikes would mean shortfall of rental income to service the mortgage payments. However, a market crash is not expected as the overall price index has already declined 10.8% over 12 quarters.”
Barring a rapid and big interest rate jump without corresponding economic improvements, we expect the hike in interest rates to be moderate, and its impact will likely be measured.
Also, based on URA data, there are also around 44,000 units of private residential properties to be completed in the next few years. Looking at the breakdown of supply, 2017 will see completions of over 13,000 units per year, followed by close to 10,000 units in 2018.
This fact will put pressure on both property prices and rentals, especially coupled with slower expected population growth as the government continues to be tight on the inflow of foreigners into Singapore.
So what is the outlook for private condos in Singapore in 2017?
Actually, the property prices have been going down since 2014 and while they are still not in decline, the fact that the demand for new homes is still stagnant shows that there is no risk of a property bubble in the near future and that the market is headed for a period of stability.
Numbers-wise, a total of 6,333 residential private properties were transacted in Q4 2016, 98.9% higher than the same period a year ago. The average price per square foot in Q4 2016 has been S$1,233, 5.5% higher compared to the same quarter last year and 3.7% higher on a QoQ basis. Amongst all the districts, Central South, Tampines and North East saw the highest number of transactions in Q4 2016.
According to URA, the private residential property index fell 0.6 point from 137.9 points in 3rd Quarter 2016 to 137.3 points in 4th Quarter 2016. This represents a decline of 0.4%, compared with the 1.5% decline in the previous quarter. For the whole of 2016, prices have fallen by 3.0%, compared with the 3.7% decline in 2015.
Regarding the expectations for private property prices and rentals for this year, Tricia Song, Head of Research at Colliers International Singapore, “notes that prices and rental can be expected to decline into 2017 given rising vacancy as demand continues to lag supply. Another bumper 6,582 units are expected to TOP in Q4 2016, bringing total completed private housing for the full year 2016 to 22,937 – the highest ever recorded in a single year.”
A buyer’s market or a seller’s market?
Song from Colliers highlights that “there will be a lot of new developer launches in 2017, but there are still quite a lot of launched yet unsold units in ongoing projects, as well as secondary sellers who may be motivated to sell into 2017 given rising interest rates.”
This means that the first quarter of 2017 will possibly be a buyer’s market while the second one would be shaped by the prevailing economic outlook and absorption of excess supply.
On the demographic trends for 2017, Song, the Head of Research of Colliers reports that “Singapore has a large public housing sector (73% of total housing stock), which caters to much of the first-time home buyers.
Singapore’s economy is likely to remain dull in 2017, with the government forecasting a 1-3% GDP growth, slightly better than 2016’s 1-2%. 2017 will experience a similar demographic trend as the previous year.”
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Also published on Medium.