IS428 2016-17 Term1 Assign1 Tee Yu Xuan

Abstract

This project aims at identifying the trends of private residential properties (including Executive Condominiums) in Singapore for the Year of 2015. The price index and share of property distribution will be taken into consideration to evaluate if the previous private property policies implemented by the government has made any significant changes.

The findings of this project will provide 3 recommended policies to further improve the private property markets in Singapore.

Problem and Motivation

Since residential prices surged in 2009 by 15.75% after the recovery of the slump in the economy during 2008. The surge in property demands renewed fears of a property bubble and the Singapore government has warned against the speculation and implemented a series of cooling measures along the years. Additional taxes such as stamp duty on additional private property purchases and harder requirements for taking up loans were introduced to make property purchases a much heavier decision to make than before.

Some important cooling measures introduced were:

• Stamp duties on private property purchases (up to 3% depending on property price)
• Additional stamp duties on purchasers who are looking to by their 2nd, 3rd or nth private property (7% for 2nd, 10% for 3rd etc.)
• Additional stamp duties on PR or foreign purchasers (up to 15% of property price)
• Bank Loan restrictions, banks are allowed to give loans up to 80% of total property price
• Stricter income requirements to qualify to different amount of loans, to prevent likelihood of defaulting on mortgage payments

After six years of cooling measures, many developers, property agents and industry associates have been calling for the measures to be lifted or amended.

But has Singapore's private property market really recovered and escaped the risk of a property bubble? Or are these industry related agencies looking to increase their profits by calling for amendments?

Changes in Property Price Index in Singapore History. The cooling measures can be seen finally taking effect in 2013 as price starts to fall.

Data (I almost wanted to give up here)

To understand if the cooling measures implemented have made any effect on the property market, the prices and supply of the property in Singapore have to be analysed.

Data used in this project are taken from REALIS which is managed by Urban Redevelopment Authority (URA) of Singapore, to ensure accuracy and relevance to the property market the project is targeting. For higher relevance, most data acquired regarding the Year of 2015.

Approaches

On further research on the URA website, they have released certain real estate figures describing the amount of private property launches and their take-ups by buyers.

Property Launches and Takeup

While examining the data collected from REALIS, a certain trend can be seen aligning with the launch and take-up trends.

Building-in-progress Landed Properties, Sold and Vacant Unit Numbers

Building-in-progress Non-Landed Properties, Sold and Vacant Unit Numbers

The above charts all show a significant trend which aligns with URA's launch and take-up data:

1. The amount of properties being built is on a decline (small amounts, but certainly a consistent decline).
2. The vacancy rate of units are increasing, even though smaller numbers of units are being built.
3. Number of units being sold in each quarter is declining.

If take-ups and sales of properties remain consistent, smaller number of properties being built will result in lower vacancy rates as people are purchasing more than the supply. However with vacancy rate declining along with supply, it shows that not only are the buyers declining as well, but at a faster rate than the number of properties built per quarter.

This finding indicates that the private property market in Singapore is definitely slowing down and the cooling measures have worked to a certain extent. (That or the economy, is really just bad right now...)

However, while looking through the data, this project also managed to identify an outlier from the common trends.

Executive Condominiums, Total Units (Sold and Vacant)

Although all other categories of private properties are on a decline, EC supply are consistent and vacancy rates are also decreasing. This can be seen as a good news for Singapore's property market as ECs purchases are more strictly governed by HDB, mainly supplying to the 'sandwiched' middle-class families whose income are too high for private properties like Terraces and Condominiums.

This can also be an indicator that private property market's cooling measures worked and have reduced both local and foreigners from investing too heavily in Singapore property market which was threatening a property bubble. The increase in EC purchases also indicates that Singaporeans looking to purchase their homes still have an alternative in the EC market even though private properties have gotten more difficult to finance.

Therefore to a certain extent in 2015, with references to the data charts above, the cooling measures have controlled the supply and purchases of private properties in Singapore.

References

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