The residential property market in Singapore is witnessing a continued rise in house prices, albeit at a slower rate than in previous years. This trend is largely due to the impact of new market-cooling measures introduced last year, which have dampened demand.

Core Central Region (CCR): Non-landed private residential property prices in the CCR increased by 4.43% y-o-y (1.42% inflation-adjusted). On a quarterly basis, prices rose by 3.38% (3.19% inflation-adjusted).

Rest of Central Region (RCR): Property prices in the RCR fell by 0.94% y-o-y (-3.8% inflation-adjusted), a sharp contrast to the 17.72% growth seen in Q1 2023. However, there was a slight q-o-q increase of 0.28% (0.1% inflation-adjusted).

Outside Central Region (OCR): Property prices in the OCR surged by 11.83% y-o-y (8.6% inflation-adjusted). The q-o-q increase was a modest 0.2%.

New rounds of property curbs

In February 2023, the government increased the buyer´s stamp duty rates for higher-value properties. More specifically, the portion of a property´s value in excess of SG$1.5 million (US$1.11 million) and up to SG$3 million (US$2.22 million) are taxed at 5%, while those in excess of SG$3 million are taxed at 6%.

Then in an expected move to restrain speculative buying and restrain house price increases, the government introduced another round of measures in April 2023, raising the additional buyer´s stamp duty (ABSD) rates further to “promote a sustainable property market and prioritize housing for owner-occupation,” said the Monetary Authority of Singapore (MAS), Ministry of Finance (MOF), and Ministry of National Development (MND) in a joint statement.

“Demand from locals purchasing homes for owner-occupation has been especially strong, and there has also been renewed interest from local and foreign investors in our residential property market,” said the authorities. “If left unchecked, prices could run ahead of economic fundamentals, with the risk of a sustained increase in prices relative to incomes.”

For Singaporean citizens, in April 2023 the ABSD rate was raised from 17% to 20% for those buying their second residential property, and from 25% to 30% for those buying their third and subsequent properties.

For permanent residents (PRs), the ABSD rate for second residential property purchases will rise from 25% to 30% and from 30% to 35% for third and subsequent property purchases.

Foreigners buying any residential property will now pay an ABSD flat rate of 60%, double the prior rate of 30%. For entities buying any residential property, the ABSD rate was also raised from 35% to 65%.

ADDITIONAL BUYER´S STAMP DUTY RATES Changes Compare from 2018 to April 2023

ADDITIONAL BUYER´S STAMP DUTY RATES Changes Compare from 2018 to April 2023
		Rates from Jul 6, 2018, to Dec 15, 2021	Rates from Dec 16, 2021, to Apr 26, 2023	New rates from Apr 27, 2023
Singaporeans	Buying 1st residential property	0%	0%	0%
	Buying 2nd residential property	12%	17%	20%
	Buying 3rd and subsequent residential property	15%	25%	30%
Permanent Residents	Buying 1st residential property	5%	5%	5%
	Buying 2nd residential property	15%	25%	30%
	Buying 3rd and subsequent residential property	15%	30%	35%
Foreigners	Buying any residential property	20%	30%	60%
Entities	Buying any residential property	25%	35%	65%
Housing Developers	Buying any residential property	25% + non-remittable 5%	35% + non-remittable 5%	35% + non-remittable 5%
Sources: Dentons Rodyk & Davidson LLP, MOF, MND, MAS, Global Property Guide

Months earlier, in September 2022, the Singaporean government introduced several market curbs to restrain property demand and encourage prudent borrowing. These include the following:

• The medium-term interest rate floor used to compute the total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR) was raised by 0.5 percentage points for property loans granted by private financial institutions;
• An interest rate floor of 3% for Housing and Development Board (HDB) loan eligibility letter applications from September 30, 2022, was introduced; and,
• The loan-to-value (LTV) limit for HDB housing loans was lowered further from 85% to 80% of the flat value (after it was lowered from 90% to 85% in December 2021), effectively lowering the amount that home buyers can borrow;
• A 15-month wait period for current and former owners of private residential property to purchase a non-subsidized HDB resale flat was imposed from September 30, 2022, onwards.

These measures came after previous curbs in December 2021 raised the ABSD rates for nearly all types of buyers.

Singapore government firmly restrains property prices

The moderation of house prices over the past years is the result of deliberate government policy.

Before and after the global economic crisis, Singapore´s property market surged. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% inflation-adjusted).

The Singapore government sensibly took steps, and when these turned out to be not enough, took further measures.

In October 2012 it limited the mortgage term to 35 years and lowered loan-to-value (LTV) ratios to 60% for loans longer than 30 years (or loans stretching beyond age 65).

This was only the first of 10 rounds of property-market cooling measures.

Seller´s stamp duty (SSD) was then introduced on owner-occupied housing sold within a year of purchase. A little later, the stamp duty was revised upwards, with sales of owner-occupied houses sold within a year of acquisition taxed at 16% of the sale price. Then the holding period was increased from one year to four years. In subsequent rounds, LTV ratios were lowered and the minimum cash down payment increased.

Despite these measures, property prices kept surging. In the sixth round, new residential loans were capped at 35 years, with existing loans over 35 years facing tighter LTV ratios. In the seventh round, the government revised the additional buyer´s stamp duty (ABSD), increasing rates from 5% to 7% for Permanent Residents (PRs) first residential property purchase, and Singaporeans´ second residential purchase.

This resulted in a 23.5% decline in sales transactions within a year, but prices continued to surge till the end of 2013.

Eighth, ninth, and tenth rounds of market-cooling measures followed.

These market-cooling measures have been effective, as evidenced by the 10% decline in property prices from 2014 to 2017.

After partially relaxing its market-cooling measures in March 2017, the Singaporean government reversed gear after 2017 sales reached 25,010 units, up 52.7% y-o-y – the biggest increase since 2009, according to URA.

From July 6, 2018, the ABSD rates were raised by 5% for all homebuyers and by 10% for entities, except for Singaporean citizens (SCs) and permanent residents (PRs) purchasing their first residential property. An additional ABSD of 5% was also introduced for developers buying residential properties for housing development.

The government also tightened loan-to-value (LTV) limits on residential property loans from 80% to 75%.

Also, the government raised the stamp duty on home purchases with a value exceeding SG$ 1 million (US$ 739,590) from 3% to 4% in February 2018.

These property curbs have successfully restrained the market in recent years.

Residential property sales still weak

Demand remains fragile, amidst the introduction of new rounds of market-cooling measures. During 2023, total home sales, which include new sales, sub-sales and resales, plunged 13% year-on-year to 19,044 units, following a huge decline of 34.8% in 2022, according to URA figures. In fact, it was the lowest level recorded since 2016.

“Over the past year, potential homebuyers have become increasingly cautious, prompted by successive rounds of market cooling measures, economic challenges, and elevated financing costs. With a greater array of choices and rising prices, homebuyers are now more discerning and price-sensitive, resulting in slower sales as they deliberate longer before committing to a purchase,” said JLL.

Then in the first quarter of 2024, there were a total of 4,230 home sales recorded, up by a modest 2.6% from a year earlier but down by 2.4% from the previous quarter.

In Q1 2024:

• Uncompleted private residential property sales fell by 3.4% y-o-y to 1,124 units, following a 9% decline in the whole year of 2023.
• Completed private residential property sales plunged by 57% y-o-y to 40 units, after falling by 24.2% in 2023.
• Sub-sales skyrocketed by 55.1% y-o-y to 377 units in Q1 2024, after increasing strongly by 69.2% in 2023.
• Re-sales rose modestly by 2.6% y-o-y to 2,689 units, following an annual decline of 19.2% in 2023.

By region:

• In Core Central Region, property sales plummeted by 44.5% y-o-y to 605 units in Q1 2024 from a year earlier, following a decline of 17.8% in the full year of 2023. On a quarterly basis, sales were down by 18.7% in Q1 2024.
• In the Rest of the Central Region, sales were up by 5.1% y-o-y to 1,148 units in Q1 2024, an improvement from a 2.2% fall in 2023. Though quarter-on-quarter, sales were still down by 5% during the latest quarter.
• In Outside Central Region, sales increased strongly by 27.8% y-o-y to 2,477 units in Q1 2024, a sharp turnaround from a decline of 18.2% in 2023. On a quarterly basis, sales were up by a modest 4% in Q1 2024.

Foreign demand is falling

Nearly 39% (about 2.3 million) of Singapore´s population are foreigners, the sixth-highest percentage of foreigners in the world. Of these, more than 9% (o.54 million) are permanent residents, and the remaining 28% (1.8 million) are expats, based on figures from the Department of Statistics Singapore.

Tighter immigration rules are being imposed by the government, due to strong popular disquiet. Beginning 1 September 2015 work pass holders need to meet a minimum fixed monthly salary of SG$5,000 (US$ 3,706) to sponsor the stay of their spouse/children here (on Dependant´s Pass) and a minimum fixed monthly salary of SG$10,000 (US$7,411) to sponsor the stay of their parents here (on Long Term Visit Pass).

Aside from the tighter immigration rules and the imposition of market-cooling measures, the COVID-19 pandemic has adversely impacted demand from foreign homebuyers in the past years.

In the past four years from 2020 to 2023, the total number of private houses purchased by foreigners in Singapore dropped to their lowest levels in the past two decades. According to real estate consultancy firms ERA Realty Network and Orange Tee & Tie, the share of foreign homebuyers to total sales in the country fell to 4.1% in 2020, 4.5% in 2021, and 3.5% in 2022, as compared to about 7% to 8% share a decade ago. During 2023, the foreigners´ share in total house purchases was estimated at about 3%.

In fact, in Q4 2023, foreigners accounted for just 1.5% of the total number of private homebuyers in Singapore.

Purchases made by foreigners plunged to just 62 in Q4 2023, sharply down from 271 in Q1 2023 and the lowest level since the government first introduced ABSD in December 2011, said Lee Sze Teck of Huttons.

Mainland Chinese buyers typically account for the largest group of non-Singaporean homebuyers in the country, followed by Americans, Malaysians, Qataris, Indonesians, and Indians. In 2022, they purchased 241 non-landed private homes in Singapore, which constituted 26.5% of transactions by foreign buyers. However, it was the lowest since 2010 and represented only about 1.3% of total condo sales, said PropNex CEO Ismail Gafoor. Then in the second half of 2023, the number of homes purchased by Chinese buyers plunged to just 11, down from 177 in H1, according to Huttons.

As such, American buyers overtook the Chinese to become the biggest group of foreign homebuyers in Singapore in H2 2023. US citizens are treated the same as Singapore citizens under the US-Singapore Free Trade Agreement, that is, no additional buyer´s stamp duty is payable on the first Singapore residential property purchase.

Foreign demand is expected to remain subdued in the medium term, amidst the imposition of another round of market-cooling measures in April 2023, raising the ABSD rates further for nearly all types of buyers, including foreign homebuyers.

For foreigners, the ABSD doubled from the previous flat rate of 30% to 60%.

After the move, the proportion of foreign homebuyers in the CCR fell to 5.3% in Q3 2023, lower than the 10% in Q2 2023 and 15% in Q1 2023.

Foreign demand continues to fall this year. In Q1 2024, purchases by non-PR foreign buyers in Singapore accounted for just 1% of the total private transactions, down from a 6.4% share in Q1 2023, according to JLL.

“While total private residential transactions slowed 2.4% q-o-q in 1Q24, the latest available data on the URA Real Estate Information System (REALIS) showed that transactions involving non-permanent residents (non-PR) foreign buyers, fell more significantly, by 34.8% q-o-q, to only 43 units in 1Q24,” said JLL.

Foreigners have been able to buy any apartment without prior government approval since the Residential Property Act of July 19, 2005. However, foreigners still cannot purchase vacant land and landed properties without permission from the Singapore Land Authority. Non-residential property is not subject to these ownership restrictions.

Mortgage loan growth decelerating fast

During 2023, outstanding housing loans rose by a minuscule 0.7% from the prior year to SG$222.02 billion (US$164.75 billion), following annual growth of 3.6% in 2022 and 6.7% in 2021, based on figures from the MAS.

About three-fourths of the outstanding housing loans are for owner-occupied properties while the remaining are for investment properties.

As a percent of GDP, the size of the mortgage market contracted to an equivalent of 33% in 2023, down from 36.8% in 2021, 39% in 2019, 42.3% in 2017, and 43.6% in 2015, based on estimates by the Global Property Guide.

Variable interest rate mortgages dominate Singapore´s housing market. Tweaking the rate on mortgages, plus government restrictions on land use and ownership, has helped pre-empt a housing boom despite sharply lower interest rates over the past decade.

Despite the introduction of market-cooling measures and a cautious buyer sentiment, Singapore’s residential property market remains resilient. The growth rate of house prices has slowed, but low unsold stock levels and healthy household liquidity suggest a stable market with moderate price increases expected in 2024.

Nevertheless, the price-to-income graph demonstrates a healthy growth trend in both property prices and income over the past decade.

Any divergence between property prices and income should not have an excessively detrimental impact due to the consistent historical growth in price and income.

Therefore, from a broader perspective, the increases in property prices have been supported by the concurrent rise in income in recent years.

Both the price-to-rent and price-to-income graphs indicate that our inflated property prices are well-aligned with the upward trends in housing prices, rental rates, and income over the years.

Based solely on this data, it is reasonable to conclude that our housing market is not in a bubble and is not at risk of crashing.

Moreover, we have implemented multiple layers of cooling measures to address the inflated prices.

If necessary, these measures can be gradually lifted to passively stimulate the property market without relying on additional government interventions.

Therefore, as long as property prices continue to increase in sync with rent and income, it is unlikely that our property market will experience a crash in the next few years.