With Singapore’s property prices sliding almost 5% for 5 straight quarters the question on everyone’s mind is when will the cooling measures be removed.
If you are not familiar with the complex measures please refer to the summary of the cooling measures in my last post.
The pain is beginning to bite for some investors as highlighted in the media of high end properties being sold for multi-million dollar losses. Rents are also falling and a huge supply of units are expected this year and next. Interest rate pressures are beginning to bare its fangs with the Singapore interbank offered rate (SIBOR) posting huge jumps recently. Some MPs raised concerns in Parliament that the there is a risk that Singapore’s property market may slip too far.
So are these mounting pressures enough to convince the government to scale back the cooling measures?
Not yet, according to the Minister for National Development Khaw Boon Wan. He has reiterated many times that although the measures are working well to tame the exuberance, prices remain elevated. However Mr Khaw mentioned in parliament recently that “we want a soft landing for our housing market because a market crash benefits no one”.
Effects of the Singapore Property Cooling Measures
Let’s look at the ‘damage’ done so far through the 9 rounds of cooling measures. The first chart below is the effect on housing prices. Note that the measures only began to bite after the TDSR was introduced.
The next chart shows the effects on sales volume. Notice that the no. of homes sold took a nose dive after the TDSR date.
It is clear that the cumulative effects after 9 rounds of cooling measures are severe on home sales but home prices have not yet reflected the severity. I think the government would like to see further drops in price before scaling back some of the measures as any premature action will see prices moving back up which may be seen as flip flopping on their part. They are also on the lookout for any signs of impending crash. This will probably bring about a quick pullback on some measures. Even then, I believe the TDSR is here to stay.
In my next post I will look at home prices from the angle of affordability for further clues.