Singapore Property Market CorrectionSingapore has been one of Asia’s crown jewels for so long now it’s hard to imagine it in a valley rather than on a peak. The little republic remains a major business hub and port and has one of the world’s highest per capita income, but the last couple of years have been hard on its property market.

Cooler Days
Like many hot markets in the region, Singapore has been implementing cooling measures designed to prevent the market from overheating over the last few years. Among those measures were borrowing limits and stamp duties, but in June 2013, the Monetary Authority of Singapore implemented its Total Debt Servicing Ratio (TDSR), which, like the Double and Special Stamp Duties in Hong Kong, has proven to be something of a market killer. “It was after the TDSR was imposed that the residential property market cooled significantly,” states Ong Teck Hui, national director, research and consultancy for Jones Lang LaSalle in Singapore.

The TDSR requires financial institutions and lenders, “to take into consideration borrowers’ other outstanding debt obligations when granting property loans.” Essentially, the TDSR was designed to prevent borrowers from having a debt that exceeded 60 percent of their income. Additionally, banks are compelled to use a higher medium-term interest rate when assessing a mortgage.

“Sales volume of private homes slowed substantially from mid-2013, after the TDSR framework was imposed by the government,” begins Ong. “In the first four months of 2014 sales volume of private homes is about one-third that of the same period in 2013. Prices have also come off by about 2.2 percent since the fourth quarter of 2013, according to the Urban Redevelopment Authority’s Residential Property Price Index.” Ong adds that the city’s leasing market has also slowed down, with rents dropping 1.2 percent, though leasing volumes remain stable. “This is due to an absence of growth in leasing demand as the government tightened the inflow of foreign workers.” Additionally, as in Hong Kong, businesses are tightening their belts and reeling in rental budgets for expatriate staff, with the exception of the lucrative marine, oil and gas industries.

Many would call it another demonstration of Singapore’s nanny state tendencies, but if nothing, the TDSR rules have driven activity beyond the city’s central region and into the mass market. Developers released 25 percent fewer new housing units for sale in the first quarter of 2014 over the previous quarter, with purchases down over 30 percent for the same period. “In a bid to encourage buyers to commit, developers dangled various sweeteners, such as early-bird discounts, partial absorption of stamp duty, furniture vouchers and direct price discounts. However, the lure of sweeteners was limited, as they were outweighed by affordability concerns,” noted Colliers International’s first quarter residential report. In an attempt to prop up the sagging market the government eased some of the TDSR regulations by allowing existing owners an exemption from the 60 percent TDSR threshold for refinancing, though it had little impact. “These changes serve only to offer some reprieve to owner-occupiers and investors looking to refinance their loans. Those who bought their properties after 29 June 2013 remain subject to the TDSR rules. As such, the changes introduced in February 2014 had minimal effect in boosting demand for homes,” said Colliers.

Roaring Back?
As it stands, the decentralised mass market is the city’s most active sector right now. According to Ong, the luxury end of the market has softened the most, and investors are turning their attention to re-emerging locations like Dubai. Luxury property has accounted for only 15 percent of all its transactions so far in 2014. “Those who are still active in the market comprise both owner-occupiers as well as investors. Under present market conditions, they tend to be price sensitive and are drawn to projects offering attractive discounts,” notes Ong.

Nonetheless, there are a few notable projects coming onto the market that could be worth investigating for investors. MCL Land’s Lakeville, in Jurong West and next door the Canadian International School, is running a median price of SG$1,300 (HK$8,000) per square foot, just slightly less than the SG$1,400 (HK$8,600) Allgreen Properties’ West Coast Sorrento launched at. CDL’s Coco Palms at Pasir Ris is averaging just under SG$1,000 (HK$6,200) per square foot, Waterfront@Faber by World Class Land and on the Sungei Ulu Pandan, is launching at between SG$1,100 and $1,350 (HK$6,800 and $8,300) per square foot, and Commonwealth Towers in Queenstown (Wealthall Development) is said to be selling four-bedroom units for less than SG$1,700 (HK$10,500) per square foot. There’s no lack of stock to choose from.

Colliers expects the rest of 2014 to be as quiet as its first three months, noting the multiple cooling measures and the TDSR have begun to bear fruit and stabilise the residential market and expects luxury prices to drop up to 15 percent, and rents up to 10. Ong agrees, predicting the 15,000 transactions of 2013 won’t be repeated. “2014 is expected to be a slow year for residential sales, compared to the last few years when the market was relatively more bullish … Prices for private homes will continue softening as the substantial supply in the pipeline will lead to further re-adjustment in prices by sellers.”