Redas: Imperative to monitor latest cooling measures for unintended consequences

By EdgeProp Team / EdgeProp | July 19, 2018 6:23 PM SGT
Real Estate Developers’ Association of Singapore president Augustine Tan says the government’s latest round of property cooling measures could have “unintended consequences” that could result in broad, negative ramifications for the property market. He was speaking at the Redas Property Market Update Seminar 2018 on July 17.
“The new pre-emptive measures will also have a negative impact on first-time buyers,” he warned, citing the tightening of the loan-to-value ratio as the measure that will hit this group of buyers the hardest. A lower LTV ratio will mean the homebuyer will need to stump up more cash or CPF outlay for down payments, which could come up to “a considerable amount”, he adds.
The afternoon discussion panel included (from left) moderator Boaz Boon, director (real estate advisory) of VestAsia Group; Wendy Low, Knight Frank’s head of retail; Christine Li, senior director of research at Cushman & Wakefield; and JLL’s Tay. (Picture: Bong Xin Ying/EdgeProp SG)
The new measures have raised the cost of private home ownership for this group of prospective buyers, creating a “deterrent [to] their aspirations” to purchase their first private home, says Tan.
According to Tay Huey Ying, JLL head of research and consultancy, there are 24,886 housing units under construction and another 15,444 units yet to be constructed. Meanwhile, the government land sales sites sold in 1H2018 could yield another 6,900 units, with another 2,100 units in the pipeline, based on GLS sites sold in 2H2018 to date.
Collective sale sites sold until mid-April 2018 are expected to yield another 13,200 units, with another 2,400 units coming from sites sold from mid-April to end-June, says JLL.
This brings the total supply of housing units to 64,840 units. If 7,000 units are withdrawn owing to en bloc or collective sales, the total translates into an annual supply of 11,568 units over the next five years. According to JLL, the average take-up rate for private housing was 11,406 units per annum for the last 10 years.
Tan says the new measures have raised the cost of private home ownership for first-time buyers, creating a deterrent to their aspirations to purchase their first private home (Picture: Samuel Isaac Chua/ The Edge Singapore)
“While the numbers may look daunting, the unsold stock is not at a record high,” says JLL’s Tay. She points to 4Q2014 when unsold stock was over 52,800 units. The GLS programme had also pumped in enough land to generate another 13,000 to 14,000 units per year over the next two years. “The GLS supply today is easily less than half of that offered in 2016 and 2017,” Tay adds.
She therefore concludes that the market can avoid an oversupply if developers pace their new launches “sensitively”. While home prices are still poised for continued growth, the pace will moderate.
Even though developers still have an appetite to build up their land bank, collective sale owners need to adjust their price expectations to take into consideration the higher transaction cost for developers, she adds.
Redas’ Tan says the additional buyer’s stamp duty of 10 percentage points that developers have to fork out — bringing the ABSD to a total of 25% plus five percentage points non-remittable — “is a big setback” for Singapore’s property market.
“The market is barely into its first year of recovery and has not been allowed time to reach a sustained supply-and-demand equilibrium,” he adds.