After 3 years of falling prices, 2018 is looking like the year that Singapore property market turnaround finally rises up again.
Real estate value rose in excess of 80% in Singapore from 2008 to 2013. Government stepped up its regulatory measures to control the overheating market for fears of a market bubble. The measures worked effectively bringing down prices by 1.4% in 2014 and another 3.7% in 2015. In 2016, everyone is closely watching the market outlook. Jones LangLasallereseach director MrOng expects prices to fall another 8% in view of the slowing ecnomoy.MAS conducted a study which concluded that Singapore home prices would be 17% higher if government had not introduced a slew of cooling measures.
The government has been cautious to ensure first time home buyers whom were citizens of Singapore were not affected. Home buyers acquiring their 2nd and 3rd residential units had seen their transaction cost skyrocketed. Some complained that government measures were too stringent, causing a higher than expected fall in property prices. For 4Q 2015, prices fell for the 9th consecutive quarters. This is by far the longest continuous fall for the past 17 years.
2016 1st quarter saw sharp uptick in residential property sales for new launches. 500 units were said to be sold, reflecting a 64% q-on-q and 73% y-o-y increase. The uptick were mainly contributed by strong demand for Cairnhill Nine, a residential project on the back of a 99 year leasehold land with total of 268 units launched near Orchard. Other indicators signaled a still depressed property market. Rents for prime sector decreased 1.3% on a quarterly basis while luxury sector rental rates decreased 2.7%. Economic slowdown is the main contributing factor. Singapore's large oil & gas sector is at an industry low point due to excess inventories and low oil prices. Industrial production, trade and retail sales continue to underperform.
Government policy to reduce population growth saw falling demand for private houses. New residential projects continue to be launched via large suburban township development and public housing building schemes. Excess supply over housing demand caused real estate values to drop. Government took public feedback on lacking of infrastructure to heart by slowing down immigration into Singapore due to rapidly increasing number of residents. Government increased public funding for new MRT lines construction, healthcare centers and public welfare projects. 2017 will be most projects reached their completion states. Government policy for relaxing immigration will see a rise in population, thus dirving up house prices.
Property market is dependent on economic growth rate. For 2016, economic growth is expected to fall within 1% to 3% only. Finance Minister, Mr. SweeKiatHeng announced that government would spend 7.3% more (totaling $73 billion). Fund allocation increase for public infrastructure spending will spur growth.
China slowdown has severely affected global growth. The electronics manufacturing in Singapore is feeling the heat and slowing demand. Government will provide assistance for businesses to brace for tough times. Income tax rebate for corporations increase 50% from 30% of tax to be paid, with a max cap amounting to S$20,000 every year in 2016 as well as 2017. Marine sector and other industry in worse conditions were given assistance in the form of foreign labor levy increment deferment for work permit holders. NUS and REDAS conducted a Real Estate survey that shows 90.6% view global slowdowns as biggest risk affecting Singapore's property market. The index for current as well as future sentiment stands at only 3.5, between 0 and 10. Slowdown is the current trend in property markets.
About 64% felt that there will be further liquidity and finance tightening. Job retrenchment will pull down the markets. Real estate values may see a recovery when government withdraws its property stabilization mechanism and policies. The Finance minister clarified that current level and price conditions do not warrant relaxation of property market tightening measures. It is still too early.