Cooling Measures. Prices Drop. Wait or Buy Now?

In a article on 17 Nov 2021, we wrote that it is unlikely that Cooling Measures will be here soon. We knew the Government will implement ABSD but we did not know it will be so soon.

My view on the 2021 cooling measures and whether will prices be affected.

1. ABSD (Additional Buyer Stamp Duty) is increased for foreigners and multiple property owners, therefore impact won’t be significant as demand for own stay is still strong.
2. most developers already have majority of their units sold and are not in selling pressure due to lack of supply in the market, therefore unlikely to reduce prices.
3. During the last cooling measure of 5th July 2018 which government increase the ASBD, prices didn’t go down. So based on history the 5th December 2021 measure will not result to much impact on developer pricing.
4. As for TDSR (Total Debt Servicing Ratio) it is just to prevent over-leveraging, and it is just a reduction of less than 10%, from 60% to 55% it will not drastically disrupt the buying plans.

on top of that:

1. Global air travel is resuming steadily and foreign buying is picking up again.
2. A lot more wealth coming from financial markets causing more buying demand in the market as Singapore is still one of the safest countries to buy properties.
3. People will go back to work and more likely job markets will stabilize.
4. In the MND (Ministry of National Development) release it was reiterated that our mortgage to income ratio is still well below historical averages therefore buying demand wouldn’t stop for people seeking homes.

As for whether it will cause similar impact to 2013 cooling measures.

It was the initial introduction of ABSD and TDSR, an all new policy that hit the market hard because, before that the market very speculative, prices were high due to multiple property owners and uncontrolled leveraging.

More Importantly:
But if you look at 2013 -2014 the people who bought there homes at that point took profit in 2018 as well if they bought the correct properties.

So a better reference will be the 2018 cooling measures which is a further tightening rather than a new implementation of policy. The impact on pricing wasn’t significant and developers didn’t have to reduce prices.

So why buy now?
In fact a good example is Martin Modern launched on 22nd July which was two weeks after the 5th July 2021 cooling measures.
People who bought it a year in 2018 paid 600-700per square foot more!

I feel this is a good period to secure your choice units at a reasonable price before market accepts the new ABSD rates and trigger another bull run.

Catch the resale market peak in 2025
And not forgetting to get your 3 years sellers stamp duty running. So that we can catch the peak resale market in 2024-2025.

As the exit strategy remains as 2025 being the high resale peak due the lesser completed new homes, if we wait a while more to purchase we will risk being stuck with SSD (Seller Stamp Duty) when the resale market is strongest in 2025.