EDMUND TIE’s comments: MND’s announcement on measures for a sustainable property market
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  • 27 April 2023

EDMUND TIE’s comments: MND’s announcement on measures for a sustainable property market

SINGAPORE, 27 April 2023 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on MND’s announcement on measures for a sustainable property market.

The government announced on 26 April 2023 more punitive ABSD rates for the residential property market. This marks the fourth major cooling measure in five years, excluding the ABST (Trust) and Budget 2023 measures. [measures announced: Jul 2018, Dec 2021, Sep 2022, Apr 2023]

The juxtaposition of accelerating home price growth (3.2% qoq) in 1Q 2023 with an economic contraction in the same quarter, coupled with unfettered housing demand going into 2Q 2023, has unsettled policy makers. The authorities recognise demand from both fronts: owner-occupiers and investors, but in an increasingly turbulent climate, they are resolute in minimising the risks of a destabilising market correction should prices rise unchecked. To this end, the aim of the measure is to moderate investment demand, while ramping up housing supply to meet genuine needs.

The hike in the ABSD rates will undoubtedly curtail investment demand, which accounted for 10% of property transactions in 2022. Foreigners, who are slapped with a doubling of ABSD rates (from 30% to 60%), accounted for about 5% of property transactions last year, and will bear the brunt of the latest measure. The consequent negative impact on demand will be felt most keenly for homes in the prime segments with a higher traditional foreign interest. Investment demand by Singaporeans and PRs will also moderate to some extent, given the more palatable 3-5 percentage points hike in ABSD rates.

Genuine homebuying and upgrading demand remains unscathed, and will likely benefit from a more gradual price trajectory going forward. While some developers could hold back their launches in the immediate aftermath to let the dust settle, most launches scheduled for this year are likely to proceed as owner-occupier demand accounts for the bulk of demand, while the clock continues ticking towards the 5-year ABSD deadline.

Nonetheless, the sharp curtailment of investment demand, especially from foreigners, in the near term will compel a very deliberate and competitive pricing strategy from developers. The overall pie has shrunk for the foreseeable picture, and achieving a healthy reception at launch will trump an overly bullish pricing strategy. Sales volumes could be softer in the near-term, as some potential buyers await for possible price adjustments from developers, especially for projects approaching ABSD deadlines in the CCR. In the secondary market, price momentum has been softening given the difficult economic and financing climate, and vendors will be increasingly open to further price negotiations in the months ahead.

While the ABSD rates for developers were left intact, developers will exercise even more restraint in upcoming land bids. We expect a decline in bidding activity and pricing levels. It is increasingly difficult to adopt sanguine underwriting assumptions; the housing market could be a victim of its own strength, as attested by repeated rounds of policy intervention in the current upcycle. Nonetheless, interest will remain strong for sites with exceptional attributes in the mass market and EC segments, which are relatively isolated from the latest ABSD hikes.

The upshot of the latest measure is that home price growth will be curtailed in the coming months. The risks are also growing for a price correction in the latter part of this year as a storm builds up, increasing economic duress, difficult financing, possible rental correction, and the prospect of further policy intervention. We expect overall home prices to rise by 4-6% this year. Primary home sales of around 7,000 to 8,000 units could be achieved, while the secondary market will see a slowdown to 8,000 to 10,000 units this year from around 14,800 units last year.


For further information, please contact:

Seah Li Ching (Ms)

Corporate Communications

DID: +65 6393 2369

Email: liching.seah@etcsea.com

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