Property market: Dealing with the effects of cooling measures and global economic turmoil

By Nur Hikmah Md Ali

/ EdgeProp Singapore |

October 26, 2023 7:43 PM SGT

Panel discussion (from left): Alan Cheong, executive director of research & consultancy, Savills Singapore; Wong Xian Yang, head of research for Singapore and Southeast Asia, Cushman & Wakefield; and Desmond Sim, CEO of Edmund Tie with Bernard Tong, CEO of EdgeProp Singapore, as moderator

SINGAPORE (EDGEPROP) - High additional buyer’s stamp duty (ABSD) is currently the biggest barrier for foreign buyers, said market analysts at the Oct 21 panel discussion on the 2024 property market outlook at the TMW Maxwell gallery.

This was in response to questions about how the market has been affected by the recent billion-dollar money laundering case, which is still undergoing investigation, and whether cooling measures will be added or removed.

The discussion was moderated by EdgeProp Singapore’s CEO Bernard Tong, who was joined by property consultants Alan Cheong, executive director and head of reserch for Savills, Singapore; Wong Xian Yang, head of research for Singapore and Southeast Asia, Cushman & Wakefield; and Desmond Sim, CEO of Edmund Tie. The panel discussion was part of EdgeProp Singapore’s 2024 Property Market Outlook event, organised in collaboration with TMW Maxwell.

ABSD hits the high-end market

While the money laundering case is a “wake-up call” for property agents to be strict when enforcing anti-money laundering (AML) measures, Sim says the high ABSD rate of 60% for foreigners presents an even bigger barrier for those planning to buy properties in Singapore.

The event was organised in collaboration with TMW Maxwell and held at the TMW Maxwell gallery in Tanjong Pagar (Photo: Samuel Isaac Chua/EdgeProp Singapore).

Cheong agrees, adding that the high ABSD rates are “holding back” the market potential of residential properties, particularly in the Core Central Region (CCR). “The market demand is there, but it is suppressed by the ABSD measures,” he says.

Cheong notes that there may be grounds for rethinking the 60% ABSD on residential property purchases for foreigners. Given the global uncertainties, foreign buyers may be compelled to invest in properties here, he says.

Rethinking ABSD is possible without putting Singaporeans at a disadvantage as they are not affected by the 60% tax. “Singaporeans also have nothing to lose, except market pricing, which is marginal,” says Cheong. “Supply in Singapore is controlled by the URA so any downsides (to Singaporeans) are limited.”

Billion-dollar money laundering case

Although the money laundering case, which has crossed $2.8 billion in terms of assets seized, will keep agents on their toes, Savills’ Cheong says most agents have toed the line with AML procedures. “There is a misconception in the market that agents have been very relaxed with AML, but that is not true. We do check against lists of flagged names, and exchange feedback about suspicious individuals.”

If there is any suspicion about the buyer, the agent will lodge a suspicious transaction report, which can be done without the buyer knowing, Cheong adds.

TMW Maxwell gallery (Photo: Samuel Isaac Chua/EdgeProp Singapore).

He notes that enquiries for super-luxury properties have slowed down. These include penthouse units or units priced above $3,000 psf. Enquiries have also slowed down for conservation shophouses and strata office spaces. One reason is that buyers are waiting for prices to drop.

“For strata office spaces and conservation shophouses, there are ultra-high-net-worth buyers with ‘kosher’ money. It’s just that they think prices will come down because of the money laundering crackdown,” says Cheong.

“When they pull back, we think most of their money is dirty, but that is not the case. They are just holding back acquisitions for a better deal,” he adds, cautioning against assuming anyone who buys high-end properties or strata offices is involved in money laundering.

Politics and economy affecting demand

Singapore’s property market will also be affected by ongoing political and economic uncertainties across the globe, such as the conflict in Israel and Gaza, rising oil prices and high inflation.

Full house of more than 100 attendees at the event (Photo: Samuel Isaac Chua/EdgeProp Singapore).

Besides geopolitics, the market will also be affected by high interest rates. Cushman and Wakefield’s Wong says this will make buyers more cautious: “Buyers will be more price-sensitive ... small units will still see value attraction but bigger units will have less demand.”

Agreeing, Cheong says that one- and two-bedroom units of some newly-launched projects “should clear fast”. He says: “For the mass and mid-tier market, developments with unique selling points, and locational attributes should clear the market fasteer than those launched in an area that has seen quite a few launches in the past.”

“For the CCR, it will probably be quiet for about the first half of next year. Prices will remain flat,” continues Cheong. “Thereafter, we will have to take another look at how the market will pan out because the 60% ABSD has hit the high-end of the market hard.”

Still, demand could slowly improve next year due to positive economic indicators in the labour market, Wong says. “Unemployment rate has remained low despite rising interest rates ... and early economic indicators like the Purchasing Managers’ Index (PMI) show the economy is starting to improve. So, demand could improve next year although interest rates may remain high.”

However, thanks to Singapore’s strong currency, the property market will not be severely affected by these global uncertainties, says Sim. “With limited opportunities for capital gain, a lot of foreign investment in Singapore will be about capital preservation. This is due to our strong Singapore dollar. And the key point is that our property price index doesn’t fluctuate too drastically,” he adds.

Growth areas: Jurong East

When asked about up-and-coming districts to look out for, Cheong and Sim highlight Jurong East, due to the launch of the 6.5ha white site on the government land sale (GLS) programme in June. The site is to be sold to a master developer and aimed at transforming Jurong Gateway (Jurong East) into a live-work-play district.

Furthermore, office spaces spanning 1.5 million sq ft are expected to be introduced at the white site. Sim says it is a “very obvious move” by the government to decentralise jobs and move them closer to homes. “If you look at the masterplan of the whole Jurong Lake district, the area is not just zoned for residential or commercial use. There are sites for new tourist attractions,” he adds.

Following the panel discussion, Peter Wee, general manager of CEL, a subsidiary of Chip Eng Seng Group, presented CEL’s upcoming developments which will be launched next year. These are the 440-unit Sora condo in Jurong Lake District, the 324-unit TMW Maxwell in Tanjong Pagar, and the redevelopment of the Peace Centre and Peace Mansion at 1 Sophia Road.

Peter Wee, general manager for business development and marketing at CEL Developments, presenting projects which are launching soon (Photo: Samuel Isaac Chua/EdgeProp Singapore).

CBD/Tanjong Pagar

In the MasterPlan MasterClass presentation “Explore the upcoming transformations in the CBD/Tanjong Pagar area”, Tong discussed the three upcoming districts of Outram, Downtown Core and Marina South, and their planned redevelopments.

The MasterPlan MasterClass is a near-monthly series that aims to create awareness of masterplan changes by the URA. It sheds light on the current demographic of a certain area, its existing amenities and future developments, as well as housing options and growth areas.

In terms of demographics, these areas have a high degree of tenants, even when rents are rising. Based on EdgeProp’s LandLens tool, about 40% of household units in the areas mentioned are tenants.

EdgeProp Singapore’s Bernard Tong on how the CBD/Tanjong Pagar districts will be transformed (Photo: Samuel Isaac Chua/EdgeProp Singapore).

In the Downtown Core area, the majority of residents are young adults between the ages of 30 to 50. Meanwhile, the ages of Outram residents are more spread out, from the ages of 35 to 65, since the area houses mature estates.

Most units in the Downtown Core are commercial spaces, with few residential areas peppered across the district. This may change in the future, Tong says, as the government is aiming to transform the area to offer more units zoned for mixed residential and commercial use so that the Downtown Core will be a place for people to work, live and play.

One way is to make the district more “liveable and pedestrian-friendly”, such as placing more green spaces in the city. For example, the Land Transport Authority (LTA) is looking at ways to convert Robinson Road into a transit-priority corridor in the CBD. This means that the road, which connects Raffles Place and Tanjong Pagar, will be changed into a “car-lite” road that is more pedestrian-friendly. These include making the road a bus-only street, with wider pavements and cycling paths that come with bicycle-parking facilities.

The government’s CBD Incentive Scheme is also another example which has spurred redevelopments in the area, including TMW Maxwell (a redevelopment of the former Maxwell House) by a joint venture between Chip Eng Seng Corp, SingHaiyi Group and Chuan Investments.

TMW Maxwell will be the first among the current redeveloped buildings in the CBD to be launched. In the pipeline are City Developments’ Newport Residences/Newport Tower (redevelopment of former FujiXerox Towers on Anson Road) and Skywater Residences (redevelopment of the former AXA Tower at 8 Shenton Way).

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