New curbs signal end of quick profit-making from property

Christopher Chitty18 Jul 2018

Home prices crop

A senior property analyst believes the days of making quick money from property has come to an end with the release by the government of its latest round of property cooling measures, reported Today Online.

Homeowners generally make more profit in collective sales than by selling their homes individually in the resale market.

But with the new measures – which took effect on 6 July 2018– property owners attempting to go en bloc will have to cut their asking price in order to seal a deal, given that the land acquisition cost for developers has significantly increased, explained Tay Huey Ying, Head of Research and Consultancy at JLL.

This comes as developers face a 10 percentage-point increase in Additional Buyer’s Stamp Duty (ABSD) as well as a five percent non-remissible ABSD when they purchase residential properties for development under the new curbs.

Tay noted that the pace of collective sale was already waning even before the cooling measures took effect since developers had sufficiently replenished their land bank via collective sales in 2017 and in 1H 2018.

And while there is “still room for collective sale activity”, the en bloc market is expected to slow down further, she said.

Nonetheless, the slowing collective sales market may prove to be positive for the wider property market as it could lead to a reduction in unsold inventory – offering opportunities for the next wave of en bloc sales.

Looking ahead, Tay still expects private home prices to increase despite the new measures, although at a moderate pace only.

“Historically, home prices have been known to be notoriously resilient against downward forces,” said Tay at an industry seminar organised by the Real Estate Developers’ Association of Singapore (Redas).

Home prices, for instance, climbed by 30 percent between 2010 and 2013 even as the government had unveiled several rounds of cooling measures then. She noted that the drop in prices in 2013 was an “inelastic downward” shift of 11.6 percent over four years.

According to her, as long as there are no shocks to the economy, such as a full-blown trade war, Singapore’s present environment of steady economic and employment growth can support a hike in prices in the near- to mid-term.

But once “prices threaten to run away…the government will not hesitate to impose further measures”, added Tay.


Senior Content Producer, Christopher Chitty, edited this story


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