Property sentiment, as measured by the NUS-Redas Real Estate Sentiment Index (RESI), took a big knock in 3Q2018. This arose from the new round of property cooling measures implemented in July. The Composite Sentiment Index, which is an indicator for the overall real estate market sentiment, tumbled to 4.0 in 3Q2018 from 6.6 in 2Q2018.

The Current Sentiment Index -- which tracks changes in sentiments over the past six months -- decreased to 4.0 in 3Q2018 from 6.7 in 2Q2018; and the Future Sentiment Index -- which follows sentiment change over the next six months -- decreased to 4.2 in 3Q2018 from 6.4 in 2Q2018.

Associate Professor Sing Tien Foo, of NUS Institute of Real Estate and Urban Studies, says:  “The uncertainties in the external economic conditions coupled with the high transaction costs imposed by the new ABSD [additional buyer’s stamp duty] policies may have double whammy impact on the local residential markets.” The sharp declines in the 3Q2018 sentiments reflect the “bleak outlook” of the property players, especially on the residential markets in the next 6 to 12 months, he adds.

RESI measures the perceptions and expectations of real estate development and market conditions in Singapore. The index was jointly developed by the Real Estate Developers’ Association of Singapore (Redas) and the Department of Real Estate (DRE), National University of Singapore. RESI comprises the Current Sentiment, Future Sentiment and Composite Sentiment indexes.

The RESI survey found that for the prime residential sector, the current and the future net balances slumped from 63% and 58% in 2Q2018 to -58% and -45% in 3Q2018, respectively. The current and the future net balances for the suburban residential sector declined from 53% and 37% in 2Q2018 to -60% and -45% in 3Q2018. The “abrupt changes” in respondents’ sentiments reflect pessimistic outlook in the residential sectors, according to the survey.

In 3Q2018, the office sector was the strongest among the sectors surveyed, with both current and future net balances at 45%. The retail sectors, particularly prime retail, put up a slightly worse performance. At 33% and 31%, the hotel and serviced apartment sectors saw improved current and future net balances, compared to 19% and 16% in 2Q2018, respectively.

On the impact of the ABSD measures in the next 6 months, 90.2% of survey respondents felt that the en bloc market would be “seriously affected”. 63.9% of the respondents expect the ABSD hike to greatly impact new sales in the residential property market. The survey finds that residential properties in Core Central Region (CCR) are more sensitive to the ABSD policy than those in Outside Central Region (OCR), while new launches of non-landed residential properties in CCR are likely to face greater resistance.

The survey respondents note that developers “have little choice but to push out the projects for launch due to ABSD and QC [qualifying certificate] restrictions”. They note that if the developers withhold launches, “these will bunch up later on, causing a big glut that will cause prices to fall”.

In 3Q2018, 20.0% and 48.6% of the developers expected “substantially more” and “moderately more” new launches, respectively.  While no developer in 2Q2018 expected new launches to decrease, in the quarter that just passed, 2.9% and 14.3% of the developers expected “substantially fewer” and “moderately fewer” units to be launched.

Of the developers surveyed in 3Q2018, only 20% expected a rise in residential property prices in the next 6 months. While only 3% expected a fall in unit price in the prior quarter, in 3Q2018, 37.1% and 5.7% of them expected the unit price to drop “moderately” or “substantially” in the next 6 months, respectively.

What will adversely impact sentiment in the property market in the next six months? The top three potential risks, according to the survey respondents, are rising inflation and interest rates, a slowdown in the global economy, and tightening of financing or liquidity in debt market.