[SINGAPORE] Generally, private homes here are seen as good long-term investments. Key drivers of capital appreciation include Singapore’s ability to transform its economy, steady increase in housing supply, policies that support a stable market, good urban planning, constant public infrastructure upgrading, the city’s attractiveness to the wealthy and political stability.
Moreover, many people aspire to own private homes here and the desire for high-quality abodes is seen to remain intact regardless of technological changes that could disrupt other property asset types.
Still, while the long-term outlook for private homes is positive, the US hiking trade tariffs and the US-China trade war can hurt the new condo market.
However, take-up rates were more moderate at condo launches in April, post the US imposing sweeping tariffs on Apr 2. During the launch weekend, One Marina Gardens sold 38 per cent of its 937 units and Bloomsbury Residences in Media Circle sold 25 per cent of its 358 homes.
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Many new condo buyers are locals buying for owner occupation, who own an Housing and Development Board (HDB) home. Might HDB homeowners pause condo upgrading plans should economic uncertainties caused by trade tensions heighten worries over job security and dampen pay packages?
Buying a new private home, which is a “nice to have”, represents a major financial commitment. A 900 square feet three-bedder suburban new condo unit can cost about S$2 million.
If the domestic economy weakens, new condo demand could wane as buyers may hesitate to take on large financial commitments and choose more affordable housing options such as HDB resale flats.
Less urgency to buy
What will likely weigh heavily on the new condo market is the diminishing of the fear of missing out or Fomo among potential buyers.
When Fomo prevails among buyers, resistance to high prices weakens and people rush to commit to buy for fear that if they do not purchase soon, prices may get increasingly out of reach.
In turn, Fomo drives momentum in the new condo market as reports of strong take-up at a major condo launch increase the sense of urgency among potential buyers.
As a weaker economy looms, Fomo among potential new condo buyers could vanish and be replaced by fence sitting, which will create its own momentum.
If take-up rates at major new condo launches moderate, potential buyers may feel less urgency to buy and instead take their time to carefully evaluate competing projects.
Perhaps, slower take-up rates at new condo launches should be welcomed given prices have rallied strongly post Covid-pandemic.
Still, a significant slowdown in the sales take-up of new condo launches will be worrying, especially against a backdrop of a slower economy.
The livelihoods of property agents could be affected. Importantly, developers building homes and buyers upgrading homes contribute to economic growth and supporting jobs.
Furthermore, when new private housing demand is strong, developers are more bullish in buying housing sites from state land tenders or the en bloc market, thus ensuring ample housing supply over the longer term.
On the other hand, if new condo buying sentiment weakens, bidding for state tenders of housing sites may be subdued. In Singapore, the proceeds from selling state land accrue to past reserves.
The state tender of the Media Circle (Parcel B), which is zoned residential with commercial at first storey and can yield about 500 private homes, drew no bids when the tender closed on Apr 29.
A silver lining?
However, with trade tariffs possibly tempering new condo demand, could developers see a silver lining by way of lower Additional Buyer’s Stamp Duty (ABSD) rates?
A potential slow down in take-up of new condo launches due to a softer economy coming post the conclusion of the general election here may offer a good window to reduce ABSD rates.
Depending on the buyer’s profile, liable home buyers pay ABSD on top of Buyer’s Stamp Duty (BSD). ABSD and BSD are computed on the purchase price or the market value of the property, whichever is the higher amount.
Perhaps, ABSD rates can be lowered for Singapore citizens and permanent residents (PRs) buying multiple homes and non-PR foreigners buying any home.
Today, a Singapore citizen pays 20 per cent ABSD for buying a second home and 30 per cent for buying a third and subsequent home. A PR pays 30 per cent ABSD on a second home and 35 per cent on a third and subsequent home. A non-PR foreigner buying any home pays 60 per cent ABSD.
Reducing ABSD rates on the above buyer profiles could still mean the above buyer profiles pay meaningful sums in ABSD and will not detract from Singapore citizens buying their first home enjoying priority as ABSD does not apply to such buyers.
Meanwhile, if more non-owner-occupiers buy new condo units, this could help ensure adequate future private rental housing supply. And having some pick-up in home buying by non-PR foreigners can be particularly helpful to condo demand in prime districts.
Invariably, lowering ABSD rates may create backlash among people who view such a move as being friendly to developers and the rich, and possibly cause a spike in private home prices thus making such homes more unaffordable.
Nevertheless, there may be greater room, with a slowing economy and the ruling party recently receiving a strong electoral mandate, for the government to manage perceptions surrounding relaxing ABSD.
While the situation with US trade tariffs is fluid, chances are that US trade policies could potentially sour new condo home buying sentiment here but pave the way for the possible lowering of ABSD rates.
