Buying property in Singapore: What defines a good property market?

property market singapore guide when to buy property in singapore

The real estate market fluctuates all the time – demand, supply and housing prices rise and dip in tandem and in response to one another.

So, what defines a good property market? That’ll depend on whether you’re a homebuyer, or a homeowner looking to sell.

Buyer’s or seller’s markets

1. Buyer’s market
2. Seller’s market
3. No buyers in a buyer’s market?

What affects activity in the property market?

1. Low interest rates
2. En bloc sales
3. MOP-ed BTO flats
3. Currency
4. Government policies

 

Buyer’s or Seller’s Markets


buyer's market meaning

Buyer’s market

A buyer’s market occurs when supply exceeds demand – in the context of property, the supply of properties for sale exceeds the number of property seekers.

If you’re seeing many houses left unsold despite having been advertised for ages, it’s an indication that nobody wants to buy.

Take for instance the downtrend in resale HDB flat transactions at the beginning of the year – the Singapore Real Estate Exchange (SRX) noted that despite the fact that fewer HDB resale flats were sold, there was no change in resale prices.

This could indicate the beginning of a buyer’s market – when sellers realise they need to lower their asking price to attract potential buyers.

Simply put, the buyer wields more bargaining power. Because sellers are more inclined to negotiate in a market that’s performing against their favour, buyers are eventually more likely to land a better price.

Tip: You can check the entire record of transaction prices of HDB flats by town, street name, or even block number on the HDB website, and that of each and every condo on the URA website.

Seller’s market


A seller’s market, on the other hand, is characterised by higher property prices and shorter sell times.

Because demand exceeds supply, houses are easy to sell, and bidding wars might even transpire if a house receives multiple offers from interested buyers.

No buyers in a buyer’s market?


Theoretically, since you’ve got the upper hand as a buyer in a buyer’s market, it’s a prime time to swoop in and seal the deal. Score!

Well, not really. It’s kind of like looking into a restaurant with no customers at dinnertime. There must be a reason why nobody’s eating there, right?

A situation where nobody wants to buy might give rise to feelings of apprehension in the market. What if they also struggle to sell their property when they decide to do so? Will things pick up? Will they be able to turn a profit from the property?

Which is why it’s useful to be a step ahead of the market. Which brings us to the next section of our guide…

What affects activity in the property market?

buying investment property in singapore

1. Low interest rates


Low interest rates stir up activity in the property market by encouraging home-buying, since most buyers take up bank loans when purchasing property.

The lower the interest rate, the less money needs to be repaid to the bank, effectively making the property more affordable.

(In response, though, property prices are likely to increase when interest rates are low or falling, due to the ensuing increase in demand.)

Conversely, increasing interest rates tend to tighten the property market as they make buying a property more expensive.

2. En bloc


As much as the strength of the property market affects rate of en bloc, the opposite also applies.

Take for instance the en bloc frenzy that happened in 2017, with the collective sale of 28 properties totalling almost S$9 billion.

The major run of en bloc sales meant an army of affected homeowners suddenly entering the property market as buyers.

The kicker? Selling a home via an en bloc deal can fetch a premium of up to 25% more than the market value, meaning these newly minted buyers could also afford to pay more than usual for their next home, driving prices up even more.

This tilted the property landscape towards a seller’s market – meaning sellers would have profited nicely if they sold their home during this time.

Tip: The entire en bloc process typically takes about 1.5 to 2 years. Meaning to say, if you’re seeing a peak in en bloc deals this year, it might be a good time to sell in the next year or two when these homeowners start looking for homes for sale.

The Straits Times has regular updates about en bloc sales in Singapore, including the developments up for en bloc bids, successful and unsuccessful en bloc sales and market predictions.

3. MOP-ed BTO flats

On the contrary, what if there’s a sudden wave of homes put up for sale? Selling gets competitive, and buyers, in theory, get the upper hand.

An example: When BTO HDB flats reach their 5-year Minimum Occupancy Period. After which, these HDB flat owners will be allowed to sell their HDB flat.

About 15-20% of BTO flats are sold within 2 years of fulfilling their MOP. So, if there has been several BTO projects in your estate 5 years ago, be prepared for a good number of HDB flats entering the resale market at this very period of time.

This effect might be less pronounced if you look at HDB flat prices on a national level, but if you zero in on individual estates, in particular the estate with these bulk of newly MOP-ed flats, you’ll see how this can seriously cause resale HDB prices to fluctuate.

4. Currency


Currency is key for the luxury market (think private properties in central Singapore, Sentosa Cove and the prime “atas” districts) in particular – it’s where international investors are looking.

The strengthening of a foreign currency against the Singapore dollar, means the Singapore Dollar – and, in turn, property too – will be less expensive.

As such, more of these overseas investors will begin eyeing investment properties in Singapore, buying in hopes of turning a profit.

These foreign investors are also often able to outbid local buyers, further hiking up property prices.

4. Government policies


In early July last year, Singapore’s property players were caught off-guard with a fresh round of cooling measures, which involved an increase in Additional Buyer’s Stamp Duty (ABSD) rates and tightened Loan-To-Value limits.

Homes became tougher to afford and/or finance, and many would-be homebuyers and investors were priced out of the market.

Singapore Citizens and Permanent Residents buying their second residential property would had to pay 12% and 15% ABSD respectively (an increase from 7% and 10% respectively), while foreigners buying any residential property would be slammed with 20% ABSD (an increase from 15%).

singapore buy house stamp duty cooling measures 2018

Loan-To-Value (LTV) limits were tightened by 5% across the board, meaning buyers would only be able to take up a smaller bank mortgage loan, while the remaining cost of the house would have to be forked out as down payment upfront.

ltv loan to value limits for buying property in singapore

For instance, a couple taking up their first housing loan to buy a $1 million condo can now only borrow 75% ($750,000) from the bank (as compared to 80% i.e. $800,000 previously).

The remaining $250,000 will have to be paid as down payment.

By regulating demand without altering property prices themselves, government policies such as these prevent property prices from going out of hand.


Read more: The COMPLETE List of Grants for Buying a HDB Resale Flat in Singapore »

More recently, the government announced a looser restriction in CPF usage for HDB flats with less than 60 years of lease remaining.

These revised rules will be implemented by May 2019 to allow homeowners and homeseekers to buy and sell shorter-lease flats more easily.

Expect the number of HDB resale transactions to increase – and we’ll have to wait and see if prices follow suit!

A good time to buy?

With all of these tips and tricks, you’re now better able to decide whether to make a move in the property market now, or if you should wait it out.

On to knowing what’s out there: Browse homes for sale to get an idea of the market, and good luck!

cheap hdb flats and condos for sale in singapore

1 COMMENT

  1. Thank you for explaining that buying properties in Singapore requires tighter LTV limits of up to 5% across the board reducing the value of mortgage loans buyers can get from their banks. This means that my mom would have to shell out a bigger downpayment to secure that Sentosa townhouse for my dad. My dad is planning on setting up an art gallery in Southeast Asia, so this property is on mom’s priority list for the year.

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