Singapore’s annual population growth fell from 3.2 percent in the 2006 to 2012 period to 1.2 percent in 2015, which implies that annual housing demand plummeted from 38,000 to 16,000 units, according to property consultancy JLL.
Nonetheless, housing supply remains high at 50,000 units per year from 2014 to 2018. This comes as the government looks to compensate for the low supply recorded till 2013.
JLL expects most of the new supply to be developed in the suburbs. Public housing units will account for 73 percent of the total stock, down from 80 percent in 2000.
Meanwhile, the slew of property cooling measures rolled out by the government has dampened the mood in the housing market.
In 2011 to 2012, home loans grew by 17 percent and 13 percent per annum for owner-occupied and investment properties, but the number of housing units grew by only two percent per annum.
JLL revealed that loan growth fell to 4.7 percent and zero percent in 2015 respectively after a cap on the Total Debt Servicing Ratio (TDSR) was imposed. Primary sales fell 60 percent as the capital base shrunk.
The presence of the Additional Buyer’s Stamp Duty (ABSD) also saw foreign purchases within the central region shrink to 10 percent from 20 to 25 percent.
Moreover, prices of high-end homes fell by 20 percent following the introduction of the ABSD in 2011, while the implementation of the TDSR in 2013 has resulted in mass market home prices dropping by 12 percent.
Looking ahead, prime and mass market prices are expected to fall five to 10 percent more before recovering in 2017.
The report noted that the government could consider replacing the various additional buyer and seller stamp duties with higher property taxes in order to push up transactions and remove friction in the market.
“Currently, non-owner occupied residential taxes do not differentiate between residents and foreigners and this can be tweaked,” added JLL.