Thaw in property cooling measures would bolster Singapore’s economy in 2017

With growth rate stabilised, residential real estate could bring economic benefits
SINGAPORE, 31 January 2017 – Singapore has averted a technical recession, posting 1.8 percent growth in gross domestic product (GDP) for the fourth quarter of 2016, and an overall growth of 1.8 percent for the year, according to recent estimates from the Ministry of Trade and Industry.
But with a subdued economic outlook both globally and in Singapore, as well as expectations of rising interest rates, house prices are under considerable pressure. Real estate consultant JLL says the residential property market is likely to remain stagnant with cooling measures still in place alongside slow economic growth.
Private home prices in Singapore softened further in the last quarter of 2016, for 13 consecutive quarters and reaching their lowest level in six years, as flash estimates from the Urban Redevelopment Authority (URA) showed at the beginning of January.
“Property prices are now at one of the most affordable levels on record,” says Dr Chua Yang Liang, Head of Research, Southeast Asia, JLL. “This clearly shows the success of cooling measures such as Additional Buyer’s Stamp Duty (ABSD) and the Total Debt Servicing Ratio (TDSR) introduced in 2011 and 2013 respectively. Now could be the right time to consider measures that allow the residential market to resume a course for moderate growth and thus avoid a sharper correction down the line.”
Based on JLL estimates in a new report, luxury prime properties have corrected on average 18 percent, while mass market prices have softened about 10 percent. Prices for some residential projects, especially those in the prime districts, have corrected between 25 percent and 30 percent since the height of the market in 2011.
“Reducing or removing ABSD for Singaporeans and replacing it with a tax based on the investment period would be a sustainable way to revive demand, bring some activity back into the market and prevent prices falling further,” says Dr Chua. “With TDSR in place, it is unlikely that removing ABSD will cause prices to run away. Taking a long-term view, this approach will align property prices with real income growth instead of keeping prices artificially low. If prices become too low relative to affordability, it becomes increasingly difficult to remove cooling measures as prices will rapidly rebound to open market levels.”
According to the report, one of the consequences of the continued measures is that Singaporeans are looking overseas for property investment in countries such as Malaysia, Australia, Japan and the UK. Data from the Monetary Authority of Singapore (MAS) indicates the value of overseas property purchases by Singaporeans reached a high of over SGD$2 billion in 2013, although the value softened to SGD$0.4 billion in the first half of 2015.
“Maintaining Singapore’s status as a global city through an open and investment-friendly environment, which includes encouraging investment in residential real estate while at the same time preventing foreign capital from pushing up prices to unaffordable levels, is a delicate balance,” says Dr Chua. “But a thaw to certain elements of the cooling measures could be particularly beneficial for the property market.”
Download our report “Health Check: Taking the temperature of Singapore’s residential property market” here.
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About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit
JLL has over 50 years of experience in Asia Pacific, with 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards.