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Recent policy changes to give property market a boost

23 May, 2017

Buoyed by an increase in the number of skilled workers, Singapore’s property market will likely see a recovery in office demand and retail sales growth, while the residential segment is set to improve following the recent easing in cooling measures.

The Government’s ambitious target to create new jobs means that Singapore will continue to allow more skilled workers into the country.

The Government targets to create about 25,000 to 40,000 jobs annually for the next few years, double the rate in 2014 to 2016. This could imply that the city’s population may grow 1.5 to 1.8 per cent per year between 2017 and 2025. This compares with a growth rate of 1.3 per cent in 2014 to 2016.

Singapore’s inflation is expected to hit 1 per cent in 2017 after two years of deflation while the economy is forecast to grow by 2.6 per cent this year and 3.2 per cent next year.

Putting these factors together, office demand and retail sales can be expected to improve after slowing for the last six years.

Sentiment in the housing market will also improve following the Government’s decision to increase housing grants for first-timers purchasing resale Housing and Development Board flats by between S$10,000 and S$20,000 in this year’s Budget.

The higher housing grants could translate to higher HDB resale sales proceeds, which could allow the sellers to buy bigger or more expensive private condominiums as they upgrade.

Assuming most upgraders to borrow up to 80 per cent loan-to-value for their mass market condominiums, this could translate to spending S$50,000 to S$100,000 more on their purchase. This translates to a 5 to 10 per cent increase in mass condominium sales, assuming the average condominium is around S$1 million to S$1.2 million.

Last month, the Government eased cooling measures on home purchases, cutting the holding period during which seller’s stamp duty is payable to three years while reducing the rate by 4 percentage points for each tier. This signals to the market that the Government is firmly on a relaxation path to gradually remove the property cooling measures as interest rates rise over the next few years.

However, while the policy measures are expected to support the soft property market, they are likely to mitigate rental and price declines rather than driving an increase in values across the various segments.

Adapted from: TODAY, 4 April 2017