Singapore property prices and rents will rise in 2022, but at a slower pace

Private residential apartments and public Housing & Development Board (HDB) housing estates in Singapore’s Sengkang area on Wednesday, Dec. 22, 2021.

Huiying of ore | Bloomberg | Getty Images

SINGAPORE — Property prices in Singapore have risen for the past two years and are likely to continue to rise despite the government’s efforts to cool the market, analysts and real estate agents told CNBC.

Private residential prices could increase by 1% to 3% in 2022, according to Leonard Tay, head of research at real estate agency Knight Frank Singapore.

JLL Singapore expects prices to rise by around 2% to 4% this year, senior research and advisory manager Ong Teck Hui said.

That’s still a much slower pace than price increases last year, where private home prices jumped 10.6% in 2021 from a year ago.

Prices for social housing on the resale market also rose by 12.7% last year, according to data from the Housing and Development Council.

In a bid to cool the scorching private and public residential real estate market, Singapore introduced new measures in mid-December. They included higher taxes on second and subsequent property purchases and tighter limits on loans.

The measures could have less of an impact on Singaporean citizens and permanent residents buying a home to live in, officials and analysts said.

Volumes and prices are expected to show some hesitation in Q1 and possibly Q2 2022 before underlying fundamentals kick in to restore home buying demand.

Foreign buyers, however, appear to have been discouraged by the new rules.

Trisni Djohari, a PropNex real estate agent whose clients are mostly from Indonesia, said she receives about 10 to 12 inquiries per month.

But she said she had only received one request since the announcement of the cooling measures in mid-December until the time she spoke to CNBC in late January.

“Most of them say they now have to think twice [before they] buy property in Singapore,” she said.

The buyer’s additional stamp duty for foreigners has been increased to 30% from 20% previously. The ABSD is a tax levied on buyers of residential properties in Singapore. It is calculated based on residency status, citizenship and the number of residential properties the person owns in Singapore.

Entities such as property developers must also pay ABSD when buying residential property, which has been increased to 35% under the new rules.

JLL’s Ong said transaction volume in the private residential market fell 20% in the second half of December after the introduction of the cooling measures, compared to the first half of this month.

Market watchers expect the effect of the cooling measures to last around two to three quarters.

“Volumes and prices are expected to show some tentativeness in Q1 and perhaps Q2 2022 before underlying fundamentals kick in to restore home buying demand,” Knight Frank’s Tay said in a statement. E-mail.

Tight housing market

Lower interest rates, limited supply and strong demand are some of the factors that have led to higher house prices.

The private residential property market was buoyed by buyers working in sectors that have benefited from the Covid-19 pandemic such as technology and pharmaceuticals, Tay said. Some people have also used the profits from the sale of their social housing to upgrade to a private unit, he added.

Demand was so high that prices jumped several times a day when a property was launched. According to a local media report, there were six rounds of price increases and the units sold ranged from S$1,400 per square foot to S$2,000 (between $1,042 and $1,490) per square foot.

“Pasir Ris 8 was the iconic one,” said Huttons estate agent Chantel Neo, referring to the private condominium in the east of the island that saw prices soar when it launched.

She said it was “quite a shock to the market”. A number of potential buyers chose not to bid on a unit because the revised prices were too high, she added.

For genuine first-time buyers, their needs are prioritized, so I don’t see any impact for them.

Zarifah Zain

ERA Real Estate Network

Homeowners will make up the majority of buyers this year, Tay predicted.

Zarifah Zain, another realtor at ERA Realty Network, said she doesn’t see these buyers being affected.

“For first-time, genuine home buyers, their needs come first, so I don’t see any impact for them,” Zain added.

Despite higher taxes, Tay said some foreigners might also be interested in buying luxury homes in the central region of Singapore.

Prices in this segment of the market have not increased as much in 2021, according to government data.

“Given anecdotal interest from potential overseas buyers, the globally mobile wealthy may still be willing to pay the 30% ABSD as a premium to enter Singapore’s prime residential market,” said Tay.

Increase in rents

The rental market has also been hot over the past two years, and the government’s cooling measures are aimed at buyers rather than renters, Zain noted.

Demand came from a variety of areas – including young adults or couples who want to live alone, temporary accommodation for those whose new homes are not ready and Malaysians who work in Singapore and cannot move around easily due to the pandemic restrictions, she said.

PropNex’s Djohari said he received 40 requests for a unit that was for rent in 2021.

It was an “owners market” and it could continue into 2022, she said. “It’s still very hot because the construction is still delayed because of the Covid.”

As Singapore’s economy recovers and the government allows quarantine-free travel arrangements with more countries, there could also be increased demand for expats, analysts said.

“This should boost rental demand and we could see rents increase by 5% to 7% this year,” JLL’s Ong said.

“Rental rate increases are expected to persist in the first half of 2022, supported by the tight rental stock inventory,” Tay said.

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