Rising prices for Singapore leaders to take measures to cool market
Singapore wants to make public housing more affordable ahead of elections. That's creating another headache for developers already under pressure from plunging sales and home prices.
Prime Minister Lee Hsien Loong said Sunday he's boosting grants for public housing, where more than 80pc of Singaporeans live. He will also raise the household monthly income ceiling to qualify for new units by S$2,000 to S$12,000 (€7,500) and to S$14,000 for more upscale executive condominiums to ensure homes are within reach for more of its citizens.
Developers are already grappling with falling prices and lower sales after the government began introducing residential curbs in 2009 as low interest rates and demand from foreign buyers raised concerns that the property market was overheating. More generous public-housing rules are likely to hurt demand from middle-income families who otherwise would have had to buy on commercial terms.
"The move will impact sales of mass-market private homes, which are already suffering from a loss in demand due to the property curbs," said Donald Han, Singapore-based managing director at real estate broker Chestertons.
Monthly private home sales have dropped to about a third the level prior to the mortgage curbs in 2013, Han said. Mass-market homes account for about half the monthly sales.
For Singaporeans who live in public housing, about 90pc of them own their apartments, one of the world's highest ownership rates.
The latest moves to draw more people to subsidized housing are adding to the woes of developers already bracing for a tougher outlook. CapitaLand, Singapore's biggest property company, said this month the government curbs will impact the market "for a while" and it's not clear when the measures will be lifted. Its biggest rival, City Developments, said the operating environment in Singapore was expected to stay challenging in the near term.
Prices dropped for a seventh consecutive quarter in the three months to the end of June, the longest losing streak in 13 years, while private home sales slumped to a six-year low in 2014. The government's curbs have included a cap on debt repayment costs at more than half of a borrower's monthly income, higher stamp duties on home purchases and an increase in real estate taxes.
While the latest public housing sweeteners will soften demand for homes that appeal to typical buyers in the wider market, they will have little effect on luxury apartments, OCBC Securities said in a research note on Monday.
"Given the government's push to improve the affordability of housing for the middle-income group, we believe there may be some impact on the private mass-market segment but this should have little implications on the high-end segment," OCBC said.
Government-built apartments, which are clustered throughout the island-state, tend to be blocky and unadorned, with laundry often hanging off bamboo poles outside. While private condominium owners have easy access to swimming pools, gyms and tennis courts, these amenities are commonly shared by entire suburbs of public-housing residents. Government units have restrictions on resale and rental, as well as a minimum occupation period.
Lee, who said on Sunday he will call for elections soon, also announced grants for families who are buying public housing units close to their parents. The incentives will prompt some eligible buyers to switch from the private market and consider government housing, said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore.
"The move will help boost demand for public housing, which saw a steeper price correction than private homes," Pandey said. "There will be some impact on demand for private mass-market homes."
Resale prices for homes planned and developed by the government's Housing & Development Board, known as HDB, have dropped 9.6pc since the third quarter of 2013, compared with a 6.7pc decline in an index tracking private residential prices.
Lee's ruling party is managing issues from rising costs to increasing frustration among citizens against an influx of foreign workers.
The government has sought to shore up support among voters in recent years by boosting spending on lower-income families and the elderly after losing some districts in the 2011 ballot. (Bloomberg)