Commentary: Why residential property prices won’t be coming down despite cooling measures

Prior to the latest cooling measures introduced in July 2018, the last time similar regulations were rolled out to moderate the residential private property market was in 2013 with the introduction of the Total Debt Servicing Ratio (TDSR).

The TDSR sought to encourage financial prudence among borrowers and strengthen credit underwriting practices by financial institutions, by limiting monthly mortgage payments to no more than 60 per cent of one’s income, and consequently curtail the amount one can borrow to purchase a property.

Subsequently, the total sales of residential non-landed properties fell by more than 44 per cent and the private property price index dipped by 3.5 per cent in 2014. 

However, the market began picking up again in the second quarter of 2017 – fuelled in part by the relaxation of the seller’s stamp duty (SSD) in March that year, which reduced the amount of time a property owner can sell his place without incurring stamp duties from four to three years, as well as a residential collective sale fever that commenced approximately in May 2017. 

 

In short, it was starting to feel like buyers were beginning to accept those property curbs as “a new normal”. 

This was reflected in the residential private property price index that year, which reversed from a contraction of 2.6 per cent in 2016 to a growth of 1.3 per cent in 2017. The volume of transactions jumped by around 48 per cent over the same period. 

Residential en bloc sales also surged to S$8.4 billion, up by more than seven times from 2016. 

This momentum carried over to 2018 with total sales climbing up by 2.5 per cent year-on-year by the second quarter as well as the price index soaring to a 9.3 per cent year-on-year. In just six months, en bloc sales reached S$10.4 billion before Jul 5, 2018.