At about 11.40pm on 15 Dec 2021, property cooling measures were announced that was going to kick in immediately at midnight on 16 Dec 2021.
This was quite different from the last cooling measures that was announced on 5th July 2018 at about 5pm.
That made developers open up their showflats and long queues ensued immediately as people tried hard to beat the cooling measures that will kick in on midnight 6th July.
Immediate Impact? Buyers & Sellers Are Now Thinking Twice
When the cooling measures were announced, clients of mine who have successfully completed their buy or sell transactions were messaging me with messages like:
- Heng ah! Settled the sale already
- Luckily we sold earlier this year
The immediate impact is giving a pause to the active buyers and sellers in the market. They are now reconsidering their choices and perhaps checking their financial numbers again.
But the truth is you just have to remain steady.
People will take advantage of and will be taken advantage of.
Just make sure you have a competent agent on your side.
Below are what I observed in the immediate aftermath of the cooling measures:
#1: We received an offer for a 3-bed resale unit in the East
The buyer actually reduced his offer (the original offer wasn’t even accepted), after the cooling measures on 15 Dec.
It was obviously not accepted, as the seller didn’t want to engage this group further as they felt that the buyer wasn’t negotiating in good faith.
#2: Another client shared a text he received from another realtor
“Those who are waiting to exercise their Options should just let them lapse.
Prices should drop more than what they would lose in option fees.
The cooling measures, and the large supply of HDB flats, and a fast retiring workforce… this mix does not bode well for residential asset values. No need to rush.”
And now – he has decided to to put buying his matrimonial home on hold because of this message.
To a certain extent, I agree we shouldn’t rush into things.
But I believe this is an important period to look out for properties that provides value or has upside potential.
More importantly, is a good fit for the family as buyers need to understand that supply for the next 2 years continue to be subdued.
The Property Supply Will Not Increase Overnight
The large “supply of flats and private residential properties” will take TIME to complete.
That said, this period remains the best time for sellers who have been sitting on the fence to enter the market as well.
There’s still a shortfall of completed supply in the next 2-3 years due to the backlog of material and labour shortages and record numbers of HDB MOP upgraders are still creating a lot of genuine demand.
The Demand Is Genuine
This additional cooling measures are also giving pause to the developers.
With the interest in enbloc starting to rise, this has certainly dampened the appetites of developers to increase their land bank.
Developers are likely to hold back from acquiring new land plots and will probably hold on longer to their existing stock of units.
Buyers should not expect further discounts if they plan to buy a new launch in the current market.
2022 and 2023 – these 2 years will be facing a low supply of new launches so developers will twiddle their thumbs.
They are unlikely to discount sell especially now that replenishing land bank costs more.
Most developers will want to maintain or increase their profit margins for their present land bank so as to make the most of their current “lower costs of inventory”.
At worst, developers might sell at a lower profit margin but not to the extent of triggering a price war as it does the whole market no good.
This is clearly evident from their behaviours during COVID and in past market cycles.
Conclusion
I leave you with the statement from this Business Times article:
Speaking to The Business Times (BT), president of the Singapore Contractors Association Limited (SCAL), Ng Yek Meng, said that the construction industry continues to face an acute shortage of workers at present.
“I don’t think we have enough capacity to take on additional works at the moment,” he added. “We have to bring back workers to ramp up capacity. The other alternative is to develop better designs (and) use technology to build more with a leaner work force for the medium and longer term.”
Since the pandemic first broke, the construction industry has been plagued by a manpower crunch as borders were shut to arrest the spread of the virus, while supply chain disruptions have led to a spike in the cost of raw materials, such as timber.
SCAL estimates that the construction industry is facing a shortage of some 50,000 workers.
He added: “Construction firms are operating at 70 to 80 per cent efficiency.”
The government is trying to increase supply by releasing more GLS plots. However, what still matters is the labour and raw materials needed to build the actual physical buildings.
In summary, it is unlikely though that this will trigger property prices to correct. The intention, as stated by MND repeatedly, is ensure a sustainable property market which appreciates in line with income growth of citizens.
In 2017, the government reduced Seller Stamp Duty (SSD) to 3 years from 4 years – that was form of “heating” measures.
As and when, these are the various tools the government will use to manage the Singapore property market.
The goal? To make sure the property market is beneficial to all stakeholders so that volatility is kept to a minimum and the wealth preservation aspect through property investments can be retained through generations.
Have questions? Unsure about how to negotiate during this current uncertainty period? Feel free to drop me a message with your questions.
[…] Many of my friends and clients believe it is now beyond their means to ever own a second investment property with the Additional Buyer’s Stamp Duty (ABSD) hike from 16 December 2021. […]