SINGAPORE - The imposition of heftier additional buyer's stamp duty (ABSD) on developers is "a big setback for the property market in Singapore", Real Estate Developers' Association of Singapore (Redas) president Augustine Tan said on Tuesday (July 17).
Referring to the government's recent cooling measures that also include tightened loan-to-value (LTV) ratios, he said that the changes have raised the cost of home ownership and cooled demand from investors and foreigners, while possibly eroding the confidence of developers, investors and buyers.
"Property markets are driven by both economic fundamentals and market sentiment. It is thus imperative to monitor the impact of the new measures as the unintended consequences could have broader ramifications," he said, while adding that Redas shares the Government's interest in maintaining a stable and sustainable property market.
He was speaking at the industry association's property market update seminar for 2018 at Orchard Hotel.
"The market is barely into its first year of recovery and has not been allowed time to find its own course and reach a sustained supply-demand equilibrium," he said.
He noted that analysts forecast reduced sale transactions of 9,000 to 10,000 in 2018 and beyond, while the overall unsold inventory and new supply of 59,544 units represent six to seven years of demand assuming the estimated 6,525 displaced owners from collective sales between last year and June this year do not downgrade to public housing.
"Demand for non-housing property will be further dampened as the measures continue to bite, exacerbating the high supply situation," he said.
Moreover, first-time home buyers would face higher cost of ownership due to the tightened LTV ratios as they will need more cash or Central Provident Fund outlays for their down payments, he said.
Developers will also have to take stock and reassess what he called the imbalanced supply-demand situation, and prepare for a "different mode of operation".
"It is in the interest of the country to have a vibrant real estate industry and a steady growth in real estate value for home owners and investors in the long term," he said.
Presenting at the seminar, CIMB Private Bank economist Song Seng Wun said that the Government likely chose to act when they did, "far earlier compared to prior cycles", because of steady fundamentals in the economy as well as possible downside risk. Various risks such as the US-China trade war, Brexit and euro zone geopolitics also are weighing on policymakers' minds.
Policymakers are also likely watching the rising household debt as a percentage of gross domestic product, as well as the household sector's total liabilities, which have risen since 2007.
"We can all take it, because the fundamentals are currently steady," he said of the property cooling measures. "Despite the hammer being applied, it's not going to cause the market to tank."
If left unchecked past the second quarter, the Government may have to intervene in the property market when macro conditions may be far more difficult, he added.
Moreover, by acting early now, the Government can still have the option to unwind or dial back on their measures later on, he said.