Singapore Easing Property Curbs Seen Unlikely As Election Looms

Singapore is not likely to ease real estate cooling measures as the country goes into a high-stakes election which can occur in the first half of next year.Although several property developers, including Dairy Farm Residences developer, have called upon the authorities to relax current curbs to assist fixing an apartment glut, such action may cost the ruling People’s Action Party serious votes. Loosening property curbs risks driving prices very high, causing properties to be more expensive for Singaporeans, analysts commented.

Singapore is grappling with a residential property oversupply which can take as long as 4 years to sell out. There are about 32,000 residential units – some completed, others under construction – in the pipeline. While housing prices decreased after the last round of cooling measures were implemented in July 2018, they have recovered in recent quarters. This was what happened to new condo Dairy Farm Residences.

Loosening curbs is “likely to be not popular prior to the upcoming general elections and can possibly drive up prices amid volatile property market conditions in neighbouring countries,” said analyst at RHB Research Institute Singapore, Mr Vijay Natarajan. “Any pre-election goodies are probably to be concentrated on the public housing sector where the government has upfront announced enhanced grants to support resale property market rates.”

Most Singaporeans and PRs live in government-sponsored Housing Development Board flats. Upgrading to a private property is usually seen as a desirable direction because of the higher value and better facilities in a private residential condominium. That’s what most of the buyers of Dairy Farm Residences feel.

Singapore’s next elections are critical for the PAP, which is experiencing a transition of power. Prime Minister Lee Hsien Loong, who has called upon his party to be ready for a tough fight, is expected to pass the leadership mantle to Finance Minister Heng Swee Keat.

Even though elections are due by April 2021, they can be called as early as March after the government reveals its budget in February. The PAP, which has governed the country since independence in 1965 and is 1 of the world’s longest-serving ruling political parties, is likely to win the impending elections. It secured about 70% of all votes in the last elections of 2015.

Even if the PAP were to implement a negligible tweak by reducing the additional buyer’s stamp duty developers shall pay from 25% to 20%, there could be a backlash.

“The political opposition can simply say that the government is assisting developers by reducing the ABSD and all kinds of well-sounding arguments will come up online,” said senior director at Savills Plc, Mr Alan Cheong. “The best thing is to simply get the elections over and get back down to creating rational decisions.”

Other reasons such as macroeconomic conditions can also play a more principal role than politics in determining whether to loosen property curbs, said the head of research and consultancy at OrangeTee & Tie, Miss Christine Sun.

Miss Sun notes that the government seems contented with the current rate of price increases while buoyant sales should assist in absorbing the unsold units. “It’s not likely they’ll want to amend things too drastically at this point,” she mentions. This is reflected in the steady take up of units at Avenue South Residence.

Regardless, cooling measures should be readjusted at some juncture, Mr Cheong commented. What is stopping a smooth functioning market is developers’ incapacity to sell bigger units, he mentioned. Stamp duties for Singaporeans and foreign buyers could be adjusted, while developers’ levies should be tiered with accordance to the magnitude of their projects, he said.

“Whether the government will adjust or not is their prerogative, but we feel that whenever measures are enforced, an action and feedback loop must be in place,” Mr Cheong mentioned.

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Source: https://www.businesstimes.com.sg/real-estate/singapore-easing-property-curbs-seen-unlikely-as-election-looms

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