Is the real estate speculation ‘fever’ over in Singapore?

PropertyGuru.com.sg published its latest findings on Singapore’s total sub-sales figures and outlook for 2014. The findings are published in a news article dated March 04, 2014, which shows that data obtained from Singapore’s Urban Redevelopment Authority (URA) for the month of January 2014 disclosed that a low figure of 37 sub-sale transactions were recorded. This has reinforced the analysis and ongoing trends that project a continuing downward trajectory in the amount of property speculation sentiment in the city state.

A sub-sale transaction is defined by the URA as: “The sale of a unit by one who has signed an agreement to purchase the unit from a developer or a subsequent purchaser before the issuance of the Certificate of Statutory Completion and Subsidiary Strata Certificates of Title, or the Certificates of Title for all the units in the development.”

A chart depicting the trend of sub-sale transactions since the third quarter of 2010 is as follows:

Chart depicting the number sub-sale property transactions in Singapore - Mar 04 2014

Source: The Urban Redevelopment Authority of Singapore (URA)

Based on the chart above, readers might have noticed the significant steep decline in the number of sub-sale transactions which as of the fourth quarter of 2013 stood at only 147 units being transacted, down from the 652 units in the previous year’s comparable quarter or 77.5 percent decline, and down from 198 transactions recorded during the third quarter of 2013, where during that quarter saw the traditional Chinese celebration of Hungry Ghost Festival taking place in late August, early September, and property transactions or for any other business activities that were at their seasonal lows of the year, apart from Christmas and New Year’s.

In the March 04 article, property investment analysts and managers interviewed by PropertyGuru have largely shared similar views that the various government cooling measures intended to curb speculation fever in the local property market have largely worked to an extent where property speculators are targeted, and their marginal costs of purchasing properties have increased, which some might have criticised as over-excessive. The Deputy Prime Minister, and Finance Minister, Mr. Tharman Shanmugaratnam, has commented in his Singapore Budget 2014 statement during a Parliamentary session two weeks ago saying that the local property market is starting to feel the effects on the cooling measures announced previously, however, the Government is not all done with relaxing those measures yet, and will only do so as and when circumstances permit.

The two property cooling measures introduced by the Government which have significantly impacted include the Sellers Stamp Duty (SSD), and the two rounds of Additional Buyer Stamp Duties (ABSD), which has effectively increased a short-term speculator’s transaction costs by as much as 34.0 percent (15.0 percent ABSD assuming a foreigner plus 16.0 percent SSD assuming he/she sells within a one-year holding period, and a further 3.0 percent of usual stamp duties and legal fees). These two types of stamp duties levied on both buyers and sellers have resulted in relatively high upfront fees that are needed to be put up before one is able to purchase a private property in Singapore. The commercial and industrial property segments have also been hit by the SSD since 2010 when it was first introduced. This piece of a price curb measure penalises these speculators as they have previously shifted tactics and focused on these segments, but were later caught on by the current legislation being put in place that proved to be a relatively high cost barrier for these speculators, or so-called property ‘flippers’.

The lack of access to easy financing, coupled with the high marginal costs being attached to the purchase of second to third property purchases have ended the level of buying enthusiasm, especially those who were once looking for short-term profits by flipping these properties repeatedly, and realising the profits within a short period of time and are now finding a ‘pain’ in trying to turn things around. These measures proved to be quite successful, but the Government has repeatedly came out to say that policy makers have no intentions of planning to stage a housing ‘crash’, which would have caused ripple effects to the entire country’s economic outlook, creating uncertainties among businesses, including the financial services, food and beverage (F&B), and other business establishments.

The housing speculation ‘fever’ has been subsided, and prices have gradually managed to revert to the mean. However, despite the ‘pain’ that is being felt across most business segments, more time is still needed by the Government to keep itself vigilant on any drastic correction that might send shockwaves to the entire local economy. The Government does not want, and has no intention to put a deadline to their ongoing efforts in ‘cooling’ down the local property markets. Instead, it wants to ensure that housing remains affordable for everyone, especially in the public housing sectors of the economy.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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