The cooling measures effect

May 23rd, 2013 at 11:40 pm

When talking about property these days with the common man, three things spring to mind. Firstly, the issue of price will definitely be brought up, whether manifested in the form of shock in reaction to the record costs some property buyers are willing to fork out for a HDB unit in the resale market, or in a lively debate about the affordability of condos

Another subject often addressed concerns supply. With the prospect of Singapore experiencing population growth brought on by an influx of foreign talents, there is indeed an underlying worry if there will be enough homes built to house everyone on this tiny island.

Yet, it is the mere mention of cooling measures which draws the most attention. Be it from the perspective of a property seeker or investor, the topic of cooling measures elicits strong opinions amongst the general public and will continue to remain the buzzword on everyone’s lips.

Have these cooling measures worked in achieving their intended aim of reducing price of private property increases over time? And should there be an anticipation of new legislation in the future?

 

PropertyGuru’s market analysis reveals that while cooling measures did in fact achieve some reasonable degree of success in cooling the hot private property market, it has also influenced property prices based on property type and locality differently.

How Cooling Measures Have Influenced Prices Based on Property Type

Looking at the total Singapore property market, the first thing that can be noticed is that cooling measures have affected landed properties and condos quite differently.

Before the first cooling measures were introduced, landed properties were trading at an average of approximately $600 psf, while the average for a condo was approximately $800 psf. As successive cooling measures were applied to the market, the growth in prices of condos has significantly slowed, while prices for landed properties have continued to follow an upward trend.

Today, although the average for both these property classes are about the same, the rate of price increase of landed properties have doubled while condos have only increased by 50 per cent over the same period. The case can be made then that cooling measures have had less effect in controlling landed property prices than they are at moderating condo prices, especially after 2011 where prices for condos have risen just 9 per cent as compared to some 30 per cent for landed properties.

On the other hand, HDBs have been relatively unaffected by the successive rounds of cooling measures, exhibiting a constant and slow price growth of 25 per cent over the same period.

Effects of the cooling measures become more apparent when we examine the price change and transaction volume of condos within a specific district. For this, we will look at District 9 (D9) in particular, which encompasses the Orchard, Killiney, Grange and River Valley precincts.

As can be seen in the graphs below, rate of growth of prices per sq ft for condos in D9 have remained virtually stagnant since 2010 with total value worth continuing to experience a decline over the period when the cooling measures were enacted.

Transaction volumes of D9 condos also tell a similar story, with the cooling measures bringing the amount of transactions back to 2009 levels when the global financial crisis occurred. A reason for this dip in demand can be attributed largely to the reaction to the Additional Buyer’s Stamp Duty (ABSD) imposed on foreign condo buyers during the 4th round of cooling measures in December 2011.

Source: PropertyGuru Group