Will Singapore’s property prices fall this year? What the data tells us

By Atiqah Mokhtar / EdgeProp Singapore | February 3, 2022 1:01 PM SGT
Past trends can provide insight on how the property market will play out in 2022 following the new property cooling measures announced last December (Credit: Samuel Isaac Chua/The Edge SIngapore)
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SINGAPORE (EDGEPROP) - During a 2022 property outlook webinar jointly hosted by EdgeProp Singapore and Huttons Asia on Jan 22, attendees raised questions on various facets of the property market and what to expect in the coming months, especially in light of the new property cooling measures announced by the Singapore government last December.
For Edgeprop CEO Bernard Tong, in view of the current uncertainties, it is important for property owners, investors, and other market participants to consider past trends and historical data that can often provide clues and insight on how the market may react in the present situation.
As a panellist for the webinar, Tong spoke in-depth on the tools available on EdgeProp’s platform that can help distil the data available from portals such as URA Realis and HDB into practical and digestible pieces that users can use to answer some burning questions regarding the property market outlook.
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How will property prices react to cooling measures?

A key question raised by several participants during the webinar related to how prices of residential properties will play out, coming off of a stellar year for the market in 2021 and the implementation of the new measures.
To answer this question, Tong used the EdgeProp Market Trends tool, which allows users to see at a glance how property prices and volumes have historically moved on a monthly, quarterly or yearly basis. The free tool allows data to be filtered in various ways, such as by asset class, transaction type, project name or street location, and property size.
Using the tool, Tong looked at two past instances where the property market faced external shocks: the previous round of cooling measures that came into effect in July 2018, as well as the onset of the pandemic in the first half of 2020.
The previous round of cooling measures occurred in July 2018 when additional buyer’s stamp duty (ABSD) rates were raised, with Singaporeans having to pay ABSD of 12% for second properties, up from 7% previously. In addition, loan-to-value limits were also tightened by five percentage points.
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chart 1 - EDGEPROP SINGAPORE
Source: EdgeProp Market Trends tool
As Chart 1 shows, immediately after the tightened measures, transaction volumes for private non-landed properties dropped 68.5% from 1,486 transactions in July 2018 to 467 units in August 2018. Average psf price saw a more muted decrease, from $1,530 psf in July 2018 to $1,482 psf the following month.
Following the m-o-m drop, the chart indicates that both average psf prices and transaction volumes rebounded and resumed an upward trajectory some eight months after measures were tightened.
The market demonstrated a similar resilience following the onset of the Covid-19 pandemic, which saw prices and transaction volumes of private non-landed property plummet in April 2020 during the “circuit breaker” period in Singapore. Nonetheless, by June 2020, the market saw a marked increase before fully recovering to a yearly high in terms of psf prices and volumes.
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“So, you can see that external shocks to [private non-landed] property prices and volumes tend to affect them for a very short term before they rebound again,” says Tong.
chart 2 - EDGEPROP SINGAPORE
Source: EdgeProp Market Trends tool
For HDB resale flats, Tong highlights that psf prices were most affected in the months following the introduction of the total debt service ratio in June 2013, which capped the amount of income borrowers can use to service housing loans at 60%.
“Resale HDB prices stayed quite low for a pretty long period of time, all the way until the circuit breaker period,” remarks Tong. Subsequently, prices shot up on the back of higher demand, given construction delays for Build-To-Order projects. (Find HDB flats for rent or sale with our Singapore HDB directory)
Tong also attributes the higher demand for resale properties to an increased preference among buyers for older flats that are larger as working from home became the norm. “I think space is a big consideration post-pandemic, and I believe that demand for space will continue,” he says.
Ultimately, given past trends, Tong believes that for the latest round of cooling measures, property prices will exhibit a similar shortterm dampening before recovering and continuing its upward trend in the second half of the year. “This round of cooling measures is probably not as shocking as the one implemented in 2013, so the external shocks caused by [this round] may last for a shorter time,” he comments.

Are developers still bullish?

Another question market observers are contemplating is how property developers are responding to the cooling measures, which include developers’ ABSD being raised a further 10% to 35% on top of the 5% non-remissible ABSD.
To answer this question, Tong utilised the EdgeProp Land Sales tool which tracks recent land and property acquisitions by developers including government land sales (GLS) and en bloc transactions. (See potential condos with en bloc calculator)
The tool uses available data and applies assumptions to estimate developers’ costs and the corresponding psf per plot ratio (ppr) price required to break even on the launch for that particular site.
en bloc acquisitions - EDGEPROP SINGAPORE
Source: EdgeProp Land Sales tool
For example, the recent Jalan Tembusu GLS site tender which closed on Jan 18 — the first one since the new cooling measures were announced — saw City Developments (CDL) emerge the top of eight bids for the site, which is located off Tanjong Katong Road in prime District 15. CDL submitted a bid of $768 million or $1,302 psf ppr.
The EdgeProp Land Sales tool estimates that to recover costs, CDL’s future development on the Jalan Tembusu site will need to have a psf ppr price of $2,059. Tong adds that developers will also incorporate a profit margin on top of the breakeven price, typically in the 10% to 15% range. For the Jalan Tembusu site, this works out to an estimated selling price of $2,300 to $2,400 psf.
With this figure in mind, it helps to do a survey of existing projects in the area as a way to benchmark pricing, Tong says. An easy way to do this is via the EdgeProp Location Scan tool that provides a bird’s eye view of all projects in a particular location.
map - EDGEPROP SINGAPORE
Source: EdgeProp Location Scan tool
For the Jalan Tembusu site, private non-landed projects in the area have an average transaction price of up to $2,459 psf. Notably, the project with the highest average psf price is CDL’s Amber Park.
Tong believes that CDL anticipates its future development on the Jalan Tembusu land, which is a 99-year leasehold site, to launch at a psf price range that is similar or close to the freehold Amber Park. “That, I think, indicates that developers [like CDL] are still bullish about the market and are pretty optimistic,” he says.

Where are the opportunities for 2022?

During the webinar, Lee Sze Teck, Huttons’ senior director of research, noted that the next six months present the best window of opportunity for home buyers, in light of the recovery and upward trajectory in prices anticipated in the market in the longer term.
In this regard, many home buyers, especially those purchasing property for the first time, are wondering whether to opt for new launches or resale units.
While there are pros and cons for each option, Tong points out that from an investment perspective, buyers may want to consider how prices for new and resale units have historically appreciated over time.
chart 3 - EDGEPROP SINGAPORE
Source: EdgeProp Market Trends tool
For private non-landed properties, Chart 3 (pulled using the EdgeProp Property Market Trends tool) shows a comparison between the average psf prices for new launches (red line) and resale transactions (blue line).
The data shows that while prices for both asset types have trended up since 2012, the gap between new launches and resale units has actually grown wider in the last few years. “So resale property prices do appreciate, but not as much as for new launches,” Tong notes.
This indicates that buyers of new launches experienced higher capital appreciation in the past, which could also translate to better gains when upgrading to their next property. However, Tong noted there could be opportunities in the resale market if the price gap between new launches vs. resale continues to widen. (Browse newly launched condos in Singapore right now)
Meanwhile, Tong also highlights that commercial and industrial spaces may be a point of interest for investors following the new cooling measures, given that they are not affected by ABSD. (Find Singapore commercial properties with our commercial directory)
chart 4 - EDGEPROP SINGAPORE
Source: EdgeProp Market Trends tool
A scan of commercial and industrial properties since 2012 indicates that prices have generally been a lot more stable compared to the fluctuations in the residential market. ”So, people are buying more for rental yield, not so much for capital appreciation,” Tong concludes, noting that for investors looking for income, this may be an asset class to consider.

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