Our Carousell Recommended Property Agent, Matthew Lam, shares some tips and tricks for how to deal with the July 2018 cooling measures.
Deciding whether to buy a property in Singapore and when to buy is tough – there are a ton of factors that could make or break your property decisions.
For one, the most recent cooling measures saw the increment of Additional Buyer’s Stamp Duty (ABSD) for multiple property owners and foreigners in Singapore:
Yikes, as if property in Singapore isn’t expensive enough.
We spoke to our Carousell Recommended Property Agent, Matthew Lam (He’s also one of the youngest top Group District Directors at PropNex!), to bust some myths about what these cooling measures means for property-buyers in Singapore.
Don’t let these untrue beliefs cheat you of potential profit:
MYTH #1. Cooling measures crash the property market
The purpose of cooling measures is not to increase (or decrease) property prices, but rather, to reduce demand for property in order to stabilise the rate of property price increase, Matthew clarifies.
You’ll see that no ABSD was implemented for Singaporean and PR first-time homebuyers – majority of people who fall under these category are buying a house out of necessity.
The 5% increase in ABSD on subsequent properties was mainly meant to deter investors and multiple property owners from stirring up the property market and potentially hiking up property prices.
MYTH #2. It’s not a good time to buy property
Ok, we’ll admit, the phrase “government intervention” doesn’t have a very positive ring to it.
But should you be avoiding property-buying?
Think about it this way. The very fact that cooling measures were implemented means you can be sure of one thing: The property market is improving.
Even if you might have to fork out additional ABSD to buy a property, it could be a worthy investment. Here’s the math:
Firstly, the cooling measures were put in place to keep property prices in tandem with economic fundamentals such as income levels.
National Development Minister Lawrence Wong shared about the property market, “The pace of price increase over that 12-month period [from mid-2017 to mid-2018, prior to the most recent cooling measures] was already almost double that of income growth in 2017.”
If not for these cooling measures, said Minister Wong, “Prices would have exceeded a 10% increase, maybe even gone up to 15%.”
But remember: Cooling measures merely reduce the rate of property price increase, meaning prices will still increase.
Based on past statistics, it’s only a matter of time before Singaporeans accept the changes in ABSD and drive up demand for property once again, causing property prices to inflate:
In fact, even after ABSD adjustments in December 2011 and January 2013, prices still continued to increase. (It was only after the Total Debt Servicing Ratio (TDSR) limit was revised in June 2013 that prices dipped for a while… before rising again!)
In other words, better buy now than later.
Plus, Matthew hints, developers offering additional discounts of 5 to 10% to incentivise buyers in the face of cooling measures.
Add both factors up and you’ve got a growth buffer of at least 20%!
MYTH 3. It’s safe to follow the crowd
“Got queue, means confirm good.”
This might be a good way to decide what to eat at a hawker centre, but the stakes are waaaay higher when you’re buying property.
It might be a good time to buy precisely when there’s little demand for property, such as after cooling measures have been freshly implemented.
Matthew’s reasoning? Would you rather walk into a relatively empty showflat where you have the privilege to select your choice unit with unhurried service from the marketing agents?
Or, would you rather squeeze with the crowd in a overcrowded showflat – a typical scene when the property market is flourishing – and be pressured to snap up a unit?
What’s next after the 2018 cooling measures?
Matthew predicts that there’s a clear opportunity to enter the property market now to wait for the next cooling measure.
“Especially since we can leverage on the first movers advantage presented to us by the new cooling measures,” he adds.
How is he so certain that further government intervention is on the horizon? There’s a vast undersupply of housing in contrast to Singapore’s growing population.
Here’s a simplified approximation:
- Projected population growth: Singapore to reach 6.9 million in population by 2030
- Required population growth to reach 6.9 million by 2030: 72,000 per year
- Average household size according to SingStat: 3.3
- New units required to house projected population growth: 72,000÷3.3 = 22,000 per year
Yet, the projected supply of new units over the next few years falls vastly below 22,000 per year:
Meaning to say, demand is set to exceed supply once again within the next few years, driving property prices up.
In order words, if you’re looking to delve into property investment, it’s time for some home-shopping!
About Matthew Lam
A Group District Director at PropNex, Matthew specialises in real estate asset progression. An advisor to thousands of successful property investors, perhaps the most compelling testament to his success is himself – through strategically analysing the market and well-calculated investments, he already owns 4 local and overseas properties at the age of 29. Get personalised investment advice from Matthew here.