Property cooling measures were on the tip on realtor and investor's tounge for the past few months.
With the property market going through a red hot phase, there were fears that these measures would be introduced to cool down the market.
House prices had risen in the first quarter, led by private home market at 3.4% . This is the highest rise in nearly 3 years. In one year, prices had jumped by 6.2% overall. As a result, there were market murmers and Government indication that property cooling measures is on the cards.
In July 2018, when cooling measures were introduced, the 4 consecutive quarter rise was at 9.1%. While the current rise is not as much, the affordability quantum is much higher. Additionally, resale condo hit a 11 year high at an estimated 1993 units in April 2021, with prices rising by 1.5%
Why Cooling Measures may be on hold?
While we could not deny the impact of prices on the decision for cooling measures, there are some factors that are taking place right now that may delay or postpond cooling measures.
1) The Covid-19 Effect
Recently, the government introduce restrictions to curb the spread of local community transmittion. Social gathering has now reduced from 8 to 2. This is similar to Circuit Breaker a year before.Back in April 2020 when Cirucit Breaker was introduced, prices plunge 57% in Apr 2020 to only 309 properties transacted.
Although viewings are not restricted this time around, the quota of 2 person would make it challenging for buyers and agents to arrange a viewing. This would probably result in a smaller transacted volume for the month of May/June 2021.
2) Interest Rates creeping up
3 Months Sibor rates have creeped up from 0.405% in Jan 2021 to 0.436% in May 202. While the increament is not significant, the general consession is that interest rates will continue to move up.
If that is the case, the cheap funding for housing loan will be over. As cost of borrowing increase, it will reduce the pool of investors for property.
3) The current Market Price
With uncertaintely staring at the market, it may not be wise to implement cooling measures during this period. Given the higher prices for New Launches, buyers would also be apprehensive about new investments with the Covid-19 restrictions looming in the background.
Why Cooling Measures could still be in the works
1) Limited units going forward into 2025
Despite the current sentiments, one thing that cannot be controlled is the limited housing supply. While there is a healthy supply of completed properties going into 2023 and 2024, the number of unsold has dwindled. Most of the stocks from 2022-2024 had been taken up. Without replenished land supply from Government Land Sales or enbloc, there will be a supply glut going forward.
Basic economics dictate that price is the result of demand and supply. If demand persist and supply dwindled, prices will be well supported from here. To curb this potential rise, cooling measures would be necessary.
2 Constructions woes
With Covid-19 measures, the supply of foreign workers needed for the construction sectors have been restricted. As a result, construction costs are expected to increase.
The glut of workers would also mean that current projects, such as BTO may be impacted. There are already incidents where BTO will be delayed for several years. For those who do not wish to wait, they may turn to the resale market for HDB or get new launches. As a result, prices could be well supported or even run up in the short run.
There is a possibility that the market might have a natural pause in lieu of Property Cooling Measures. Nonetheless, should the market rebound after Covid-19 restrictions ( property transactions jumped after Circuit Breaker), Property Cooling Measures will still be a card the government will play in a red hot market.
If one is looking to purchase a property, should they enter the market now or wait?
Like most measures taken to cool a market, it is usually tempoary. Eventually, market forces will return and dictate prices. Given Singapore's limited supply and the possibility of increase demand with the return of foriegners post Covid-19 era, it does not need a crystal ball to determind that prices would be on an uptrend in the future.
Should you wish to have a calibrated strategy or be ready to purchase when the time is right, do drop me a message for a complimentory Property Wealth Advisory session here.
Always glad to be of service.