A leading global financial centre in South Eastern Asia, Singapore has a tropical climate and is one of the cleanest environments in the world. It is recognised as the most technology-ready country on earth and ranks highly for education, safety, innovation, quality of life, health, transport and international trading.
As a result of Singapore’s many positive attributes, the residential housing market has faced significant price and availability pressures in the past. In a deliberate effort to retain more of a balance between house prices and underlying economic fundamentals, the government introduced cooling measures which created a downward trend over the years preceding 2017.
However, house prices returned to growth in 2017, as a result of robust underlying demand. This has led the government to put in place further measures to cool the market in line with its strategy to keep house price growth in check.
These have included a five percentage point increase in stamp duty for second home purchases as well as a five percentage points lowering of loan-to-value (LTV) limits. Also, foreign buyers without a permanent residency must now pay stamp duty of 20% instead of 15%.
These new measures already appear to be having an effect; overall house price growth slowed to 0.5% in Q3 2018 after a 3.4% recovery in the previous quarter, and 7.4% for the first half of the year. This is compared to 2017 growth which was just 1.1%. It is also having a negative effect on demand in the new build sector. Despite a 21% fall in construction completions in 2017 compared with the previous year, new supply is currently outstripping demand.
However, economic fundamentals remain strong. GDP growth was 3.6% in 2017, with projected growth of 3.3% in 2018. Despite cooling measures, price growth is expected to remain flat or slightly positive underpinned by high land prices and healthy demand.