“The timing, scope, and extent of the measures were carefully considered after monitoring the market for several quarters,” says Tong. (Picture: REDAS)
SINGAPORE (EDGEPROP) - The steady increase in private housing and HDB resale prices since the start of the pandemic signalled an “increasing risk of property prices running ahead of market fundamentals and impacting housing affordability”, says Edwin Tong, minister for culture, community and youth, and second minister of law.
He was speaking at this years’ Real Estate Developers Association of Singapore (Redas) Spring Festival lunch on Feb 9 where he was the guest of honour.
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Many of the property developers who attended the event had voiced concerns when the government announced a new round of property cooling measures last December. “Many of us least expected that 2021 would end with another round of tough new property cooling measures,” says Chia Ngiang Hong, president of Redas.
The quantum of increase in the additional buyer’s stamp duty (ABSD) is “hefty”, says Chia, noting that the revised land rate ABSD of 35% payable by developers comes as they contend with “thin margins and battle rising construction costs”.
According to Chia, the hefty ABSD will “certainly constrain developers’ ability to embark on new projects” as the built environment sector is severely affected by labour shortages, rising material costs, and financial woes.
The minister defended the government’s move as necessary to stabilise the property market and ensure housing affordability, although he acknowledged that significant uncertainties persists and the operating environment remains challenging for many businesses.
Chia Ngiang Hong, REDAS President, noted that the revised land rate ABSD of 35% payable by developers comes as they contend with “thin margins and battle rising construction costs”. (Picture: REDAS)
“The timing, scope, and extent of the measures were carefully considered after monitoring the market for several quarters,” says Tong. He points out that private housing prices rose by 9% between 1Q2020 and end-2021. Similarly, HDB resale flat prices saw a sharp increase after a six-year decline, climbing 15% over the same period.
Although house price-to-income ratios are below their historical average, the recent price movements signal a “clear upward momentum”, says Tong. Transaction volumes in the private market and HDB resale market were also high despite the ongoing Covid-19 pandemic. (Find HDB flats for rent or sale with our Singapore HDB directory)
However, Chia says that serious vulnerabilities still persist, especially the prolonged delay in project completion timelines and the pressure developers face to sell out existing projects.
“Sales of units are expected to slow down due to the significant hike in ABSD rates on second and subsequent home purchases, as well as for foreigners. Coupled with ramped up GLS [government land sales] land supply by the government, developers are concerned that they may not be able to sell all units in their current projects under the revised ABSD framework within the stipulated fiver-year timeline,” says Chia.