Everything is going up, Property prices and rentals both have gone up. Interest Rates and Mortgage Rates have also gone up. Household utilities bills had also gone up. It seems every item related to property all had gone up.
The next important question to ask, how are the working class coping with the rise of cost of living? The rich will surely be the least affected and especially those who own multiple assets that had appreciated along with inflation. But before we discuss further let’s understand the situation in Singapore housing.
There are two housing markets in Singapore, the public housing market which is essentially the HDB BTO and resale HDB flats, and the private housing market consisting of private condominiums and others.
It is true that prices of housing in Singapore are going up, but what are really the cause?
Population
With a growing population and limited space, housing prices would go up, even if everything else remain status quo. Since 1960, our population has gone up from 1.7 million to 5.64 million means population density has increased as well.
Purchasing Power
From 2015 to 2021, the median wage of Singaporeans had increased from S$3,949 to S$4,680, which means their CPF savings increased too. At the same time the residential property assets for both public and private housing have increased over the same period of time, allowing Singaporeans have more purchasing power and are buying up more properties.
Because of having more purchasing strength, more Singaporeans are buying more than just one property, one for residence and the others for investment purposes, which leads to even greater demand. When properties are treated as a commodity, this can lead to affordability problem for those who really need a home and are priced out of the private market by richer Singaporeans and even the higher quantum resales HDB.
Pipeline
Due to the strong demand for public housing in recent years, HDB has been ramping up the production of BTO projects. Due to the pandemic that lead to supply chains issues, HDB BTO flat supplies are not keeping up with the current demand for housing.
The private market has a massive gap opening up between demand and supply. Some richer Singaporeans may also buy private properties and keep their HDB flat to rent out once the MOP is over, denying ownership to other Singaporeans and takes one more property off the market, which led to further reduction of supply.
FAQ
Will Singapore Property price then drop?
Over the years, various cooling measures have also been rolled out to help slow demand such as increasing Additional Buyer Stamp Duty (ABSD) rates and tightening the Loan-To-Value (LTV) limit for loans from HDB from 90% to 85% in 2021. More recently, additional cooling measures have brought the LTV limit for HDB loans down to 80%, forcing buyers to have more cash on hand. The Government has also extended the wait-out period to 15 months for private residential property owners (PPOs) and ex-PPOs to buy a non-subsidised HDB resale flat.
If property price going to drop why then the government kept rolling out cooling measures?
Are the foreigners responsible to hype up Singapore property price?
If we look more broadly at the private market, the percentage of foreign buyers has actually decreased to three per cent of all private property transactions over the past two years, compared to five per cent between 2017 and 2019.
The government property cooling measures had increased ABSD rates in the private housing market to help curb demand from the rich. Clearly, foreigners aren’t the issue here and likely there are other local factors at play that are driving up the demand both the public and private housing markets.