Category Archives: Cooling Measures

De Souza once again calls for removal of ABSD for Singaporeans

The ABSD is making it difficult for Singaporeans to buy residential property.

The government should consider the gradual and calibrated approach of lifting the Additional Buyer’s Stamp Duty (ABSD) for Singaporeans, as it makes it harder for them to buy a home, said MP Christopher de Souza in Parliament recently, reported The Business Times.

He first put forward this suggestion in January (MP urges removal of ABSD for Singaporeans).

On the other hand, the ABSD for foreigners should remain to deter speculative activity.

Similarly, the authorities should keep the Total Debt Servicing Ratio (TDSR) framework in place for local and overseas buyers, to ensure they only purchase homes that they can afford.

“This should allay any concerns that easing the property cooling measures will cause a surge in Singaporeans purchasing second properties when they may not be able to,” he explained.

Following the introduction of the ABSD in 2011 and the TDSR framework in 2013, construction activity in the private housing and industrial segments have slowed down significantly.

The construction industry’s growth softened from 3.5 percent in 2014 to 2.5 percent last year. In turn, the Ministry of Trade and Industry warned that the construction sector’s lacklustre performance is among the factors that would negatively affect the economy in 2016.

However, Finance Minister Heng Swee Keat said in his recent budget speech that it’s still too early to ease the property cooling measures, based on their assessment of current home prices and prevailing market conditions.

Meanwhile, de Souza urged the government to look at Australia’s approach in bringing down home prices. Under recently enacted policies there, foreigners can only buy new homes and they cannot sell them to other overseas buyers.

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Singapore property now less attractive to investors

While still considered a safe market, Singapore’s popularity with property investors has fallen.

Singapore’s appeal as a property investment destination for institutional investors has diminished this year, in comparison to other developed Asia Pacific cities, particularly in Australia and Japan.

This decline in popularity has been attributed to the property cooling measures, and the glut in office and logistics space amid softer consumer sentiment, said UBS in a report by The Straits Times.

In fact, property prices, as well as the volume of real estate deals and loans, would have been higher by around 33 percent if the cooling measures had not been introduced, said the central bank in November 2015.

Nevertheless, some institutional investors still view Singapore as a safe market, and there has been no exodus of property investors, according to Graham Mackie, UBS Asset Management’s Head of Global Real Estate for Asia Pacific.

Inbound investment to Singapore also surged 157 percent to US$3.4 billion in 2015 on a yearly basis, based on data from Real Capital Analytics. But this is still a far cry from the outbound capital of US$28.7 billion, which posted a growth of 49 percent.

Meanwhile, more money is being pumped into Australia and Japan’s property sectors, compared to those in Singapore, Hong Kong and China. Real estate yields in Australia are also significantly better than the risk-free rates in the market.

“Australia is a relatively efficient market with strong rule of law. The Australian dollar has depreciated significantly against the US dollar, and investors who are more swayed by currency considerations see Australia as relatively cheaper,” added Mackie.